Technical Analysis of Stocks Commodities TASC JANUARY 2021

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SHORT-TERM
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STRATEGY
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FEAR AND STRESS
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ETF MIDCAP GROWTH

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INTERVIEW
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CONTENTS JANUARY 2021, VOLUME 39 NUMBER 1
7 Algo Q&A
by Kevin J. Davey
The Traders’ MagazineTM Got a question about system or algo
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EDITORIAL
editor@traders.com FEATURE ARTICLE
Editor in Chief Jack K. Hutson 8 A Fresh Look At TIPS
Production Manager Karen E. Wasserman Short-Term Patterns
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The editors of S&C invite readers to submit their opinions and information on subjects Editor: There is a new feature at our
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be useful in their trading.
This feature can be found on our
TREND DIRECTION AND PROBABILITY: MORE ON TREND DIRECTION AND homepage at www.traders.com under
THE BULL BEAR INDEX PROBABILITY: THE BULL BEAR INDEX “Readers’ Choice Awards—Historical
Editor, Editor, Winners.” We hope this helps.
I thoroughly I’m writing about the article in the No-
e nj oye d M i k e vember 2020 issue, “Trend Direction
Siroky’s article on And Probability: The Bull Bear Index,”
the “Bull Bear In- by Mike Siroky. I would like to pursue
dex” in the Novem- using his technique.
ber 2020 issue of I was wondering if there is coding
Technical Analy- available for this indicator so I can use
sis of Stocks & it on my trading platform?
Commodities and I would like to use Thanks a lot for your help.
it in my own trading. Antonio
However, I don’t understand how to
set up the Excel formula for the t.dist Editor: We asked a platform developer On a related note, we’d like subscrib-
function in Excel; perhaps you could about possible implementation on a ers to this magazine to know that voting
persuade Dr. Siroky to provide the trading platform, and they offered the in our annual Readers’ Choice survey is
Excel code. following thought. now underway! Results of this survey are
Thank you. One way to implement it could be used to determine the next set of Readers’
Tony for motivated readers to download and Choice Award recipients. Recipients of
use a third-party library such AlgLib, the awards will be revealed in our Bonus
Author Mike Siroky replies: MathNet, or MetaNumerics to imple- Issue of Technical Analysis of Stocks &
Here is the Excel command for the ment the “student’s distribution” used Commodities magazine, to be published
cumulative t-distribution: in the calculation of the technique. in February.
You first need the difference between Maybe someone reading this will Voting ends December 31, 2020. Visit
high and low probability normalized also have some suggestions or thoughts our website at www.traders.com to cast
by the combined standard deviation, to offer. your vote! We want to hear from you.
as described in the article. We can call
this normalized value x. You also need VERIFYING READERS’ CHOICE
the degrees of freedom (df) which is
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For a time window of 25 days, degrees I am interested in purchasing a particu-
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first want to collect some feedback on technical indicators, charting,
Type into a blank box: the product from other users and try trading systems, money
management, intraday trading,
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=t.dist(x,df,true) able to do. cycles ... and more ... we’d like
I know your magazine gives out Read- to hear from you!
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a value between 0 and 1. year, and I often see product vendors
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Hope this helps. Thomas
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Algo Q&A
ALGORITHMIC TRADING
Have a question about system or algo trading? Kevin J. Davey has over 25 years
of system trading experience. Davey is a full-time trader, and he also teaches
and consults via his Strategy Factory online workshop (https://kjtradingsystems.
com). He is the author of several bestselling trading books, including Building
Winning Algorithmic Trading Systems and Introduction To Algo Trading. Send
your questions or topic suggestions to Kevin Davey at kdavey@kjtradingsystems.
com. Selected questions will appear in a future issue of S&C.
Kevin J. Davey
CLOSING TIME(S) Confused yet? Maybe an example after 5:00 pm—when the exchange
I have a gold algo, and I was calculat- will help. determines the settlement price—the
ing values today after the close at 5 pm Here is how the data is presented in daily bar closing price will “jump” to
and got an entry signal. But at 6 pm, TradeStation: reflect the settlement price.
the closing price had changed signifi-
cantly, making my signal invalid. What XX minute bars: Closing price is For some markets (like the mini S&P),
went wrong? always the last price traded. So, with a this difference is usually minor. But for
Based on your question, I would guess 1440-minute bar, the closing price will markets like gold and crude oil, the dif-
that you have fallen victim to the “last be the last price traded at 5:00 pm ference can be huge.
vs. settlement closing price” issue. Let Figure 1 shows an example—the
me explain it, and I’ll give you some Daily bars: Closing price during the
workarounds. day will be the last price traded. But, Continued on page 17
Back in the old days, all futures and
commodities were traded in pits, via
open outcry. There was no electronic
market, and there were limited trading
hours—not the near 24-hour markets
we enjoy today.
To further confuse the issue, many
markets closed at different times of the
day. Gold, for example, closed at 1:30 pm.
The exchange then determined the settle-
ment (closing) price for the day based on
the last minute or two of trading. That is
TRADESTATION
the price you’d see on your daily equity
brokerage statements.
When markets transitioned away from FIGURE 1: GOLD, LAST PRICE TRADED VS. DAILY SETTLEMENT PRICE. The 1440-minute bar close is the
pit trading, the market hours expanded last price traded, while the daily bar close is the daily settlement price.
(gold now closes at 5:00 pm), but the
settlement price time fix did not. Gold
still has a settlement price calculated at
1:30 pm, even though the market is open
until 5:00 pm. For reference, you can find
a list of settlement times for the CME
futures exchange here: https://www.
cmegroup.com/market-data/settlements/
settlements-details.html
This means we have two possible
closing prices: the last price traded at
5:00 pm, and the settlement price of
around 1:30 pm. This creates an issue
of how the data is presented to the user.
Is the closing price shown the last price FIGURE 2: DIFFERENCE IN LAST PRICE TRADED VS. SETTLEMENT PRICE. The price of gold plummeted
traded, or the settlement price? And does in the last few hours of the trading day, after the settlement time. This causes the 1440-minute and daily bars
this even matter? to be dramatically different.
January 2021 • Technical Analysis of Stocks & Commodities • 7

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PRICE PATTERNS
With (And Without) A Trend Filter
A Fresh Look At
Short-Term Patterns
You may be familiar with some of the most popular • Key reversals, a higher high followed by a lower
short-term patterns, but do you know which work close. We sell the lower close. The opposite for
best? These test results may help you find out. buy signals.
I
• Island reversals, a gap higher followed by a lower
have always liked short-term price patterns. close, but not filling the gap. We sell the lower
The simplest, such as an island reversal, close. The opposite for buy signals.
seem intuitively correct. The best study of • Outside days, a higher high and a lower low, but
chart patterns I’ve seen is by Thomas Bulkowski, the close in the upper or lower 25% of the range.
who ranked the three top bullish patterns as We buy if upper, sell if lower.
follows: • Wide-ranging days, the same as outside days,
but the true range must exceed 1.5 × 20-day
1. Upward breakout of a rectangular top (this is average true range.
the same as a breakout above a horizontal re- • Compression, the most recent 3 days must each
sistance line) have a true range smaller than the 4th previous
2. Upward breakout from a falling wedge day. We buy a breakout above the highest high
3. Upward breakout from an ascending triangle of the last 3 days and sell a breakout below the
lowest low of the past 3 days.
and the three best bearish patterns as: • Gap openings, must be larger than 0.5 × 20-day
ATR. We buy or sell the close of the gap day in
1. Descending scallop (a series of failed attempts the direction of the opening gap.
at recovery)
2. Downward breakout of a symmetric triangle in All of these require no more than three days to
a downtrend identify and generate a trading signal. That fits my
3. Downward breakout of a broadening top idea of instant gratification.
Patterns can range from simple to complex. The The test

most complex one that I know of can take 22 days to I will select a small set of ETFs and stocks that I think
produce a signal. But most traders, including myself, are a representative sample and of interest to investors:
want something faster. The question is, “Are there SPY (S&P 500), QQQ (Nasdaq), IWM (Russell small
short-term patterns that work?” caps), AAPL (Apple), AMZN (Amazon), GE (Gen-
eral Electric), WMT (Walmart), and TSLA (Tesla).
A selection of short-term patterns Hopefully, we can draw some valid conclusions. One
Most of us are familiar with the popular short-term problem with testing a large number of stocks is that
patterns, but not necessarily which are better and the averages hide many of the good results.
which are worse. In this article, I’ll take a look at the I will test from January 2000 through July 2020, a
LISA HANEY
following patterns: sample that includes a wide variety of trends, price
by Perry J. Kaufman
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FIGURE 1: KEY REVERSAL PATTERN. In this example, cumulative returns following
a key reversal day are shown.
FIGURE 4: KEY REVERSAL BULL. Key reversal bull moves (top) and summary
(bottom).
FIGURE 2: KEY REVERSAL PATTERN. The same data from Figure 1 is shown
graphically here, cumulative returns following a key reversal day. FIGURE 5: KEY REVERSAL BEAR. Key reversal bear moves (top) and summary
(bottom).
Peak returns for TSLA occur on the second close after enter-
ing a key reversal upward. But then, TSLA has been in a strong
uptrend, so we would expect the upside to be more profitable
than the downside. SPY shows no gains at all, for either the
upward (bull) or downward (bear) reversal.
What if we filter these reversals with a trend, taking the
reversal only in the direction of the trend? To avoid massive
FIGURE 3: TREND FILTER. Cumulative returns using a key reversal plus a trend testing, we will only look at the 80-day moving average, which
filter. I consider representative of a macrotrend strategy. Figure 3
shows the results.
shocks, and market confusion. While the trend does not seem to change the returns of TSLA
The position size is always $10,000 divided by the closing except to make days 3, 4, and 5 similar, it drops the number of
price. That will come close to making each trade equal risk so bull trades from 54 to 32, a reduction of 40%. That makes the
that a trade taken in 2020 at a high price will not overwhelm profits per trade 40% larger, a significant benefit. The trend
a trade taken in 2000 at a lower price. improved the downward reversals but not by enough to make
In addition to the results of these patterns, I will also apply them an interesting trade.
an 80-day moving average trend filter, typical of a macrotrend
system. We will buy only when the moving average is up and A broader view of the key reversal
sell when it is down. When we look at our set of 3 ETFs and 5 stocks, we see a pat-
tern that is different for ETFs and stocks. Because the ETFs
Example are an index, the results are muted compared to stocks. QQQ
Let’s look at the first pattern, a key reversal, applied to SPY and IWM are more volatile than SPY and show gains on days
and TSLA, two extremes. Because the SPY is the cap-weighted 3 and 4 for upward moves. Our selected stocks perform much
average of 500 stocks, it will always be less volatile than an better on those days. This can be seen in Figure 4 and in the
individual active stock such as TSLA. The table in Figure 1 averages in the lower section.
separates the upward reversals (“bull moves”) from the down- The lower table clearly shows that the stock returns increase
ward ones (“bear moves”). The numbers are the cumulative and peak on day 4. The equity index ETFs have small, positive
profits and losses from the entry on the close of the day of the returns on days 3 and 4.
reversal. Figure 2 shows the same returns on a chart. The bear market scenario is different, as seen in Figure 5.
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FIGURE 6: KEY REVERSAL. Key reversal results using an 80-day moving average
trend filter.
FIGURE 8: 3-DAY COMPRESSION. (Top to bottom): Bull moves with and without a
trend filter; bear moves with and without a trend filter.
Island reversal
The island reversal is more specific than the key reversal; there-
fore, it has only a few trades per year. That would be fine if it
produces more consistent or more profitable returns. Figure 7
shows the summary of bull and bear island reversals, with and
without the trend filter.
Unlike the key reversal, this pattern shows profits for the
index markets. For stocks, WMT and TSLA were profitable for
FIGURE 7: ISLAND REVERSALS. (Top to bottom): Bull moves without and with a upward moves without the trend, but the averages reflect large
trend filter; bear moves without and with a trend filter. losses from AAPL. An island reversal in the index markets
would indicate a broad economic event.
Again, stocks outperform the index markets, but this time all but
GE and TSLA are negative, with the least negative being day 1 Compression
and day 2. We can guess that the upward bias of the stock market The 3-day compression represents a market that is consolidat-
makes it difficult to profit from moves to the downside. ing, and the trading signal is a breakout of the high or low of
those 3 days. The highs and lows of the 3 days do not have to be
Adding a trend filter inside the larger range of the 4th day back, only the true ranges
Normally, trading only in the direction of a macrotrend will must be smaller. It is interesting because it seems to identify
improve returns. It will also reduce the number of trades. Con- more frequent and more reliable moves to the upside when
tinuing with the key reversal example, but only showing the compared to the previous patterns. Toby Crabel referenced
summary, the results of the bull moves (up) are similar to the this as one of the best patterns for intraday trading. Results are
results without a trend filter, but using the trend filter (Figure shown in Figure 8. This formation does not work well with a
6) reduces the number of trades by about 37%, which makes trend filter. AAPL and TSLA had strong returns when taking
the profits per trade that much bigger and reduces the time in upward breakouts.
the market. Less time in the market means less risk.
Outside day
An outside day indicates volatility, a much more active day. In
our test, we go long if the close is in the upper 25% of the range.
All of these require no more We sell short if the close is in the lower 25% of the range.
than three days to identify Figure 9 shows the four summary results. Bull moves, that
is, upward breakouts, are profitable for both index ETFs and
and generate a trading stocks, with all markets net positive after 4 days. Breakouts to
signal. That fits my idea of the downside posted losses everywhere.
instant gratification. Adding a trend filter gave results similar to the key reversal.
The net returns were slightly lower but the reduction in the
number of trades made the profits per trade higher.
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FIGURE 9: OUTSIDE DAY BREAKOUT. Outside day (top to bottom) upward breakout FIGURE 11: GAP OPENING. Gap opening (top to bottom) upward with and without
with and without a trend filter; downward breakouts with and without a trend filter. a trend filter; downward with and without a trend filter.
open up or down $1.00 to qualify. That turns out to be about

125 cases over the past 20 years. Hopefully, these larger gaps
will have a predictable pattern.
Our rule is to go long or short on the close of the day with the
gap, not on the opening gap, and take a position in the direction
of the gap opening. We are looking for some continuation over
the next 5 days, and this makes it easier to compare the gap
opening with the other patterns.
Figure 11 shows that an upward breakout is followed by up-
ward moves, for both index ETFs and stocks, with the higher
returns on day 5. The best performers were AAPL, TSLA, and
AMZN, in that order. The only loss was in the SPY, a market
dominated by noise.
Gaps to the downside were also profitable, but only during
the first two days, then those gains drifted away. The trend filter
improved the stock returns everywhere but hurt the index returns.
FIGURE 10: WIDE-RANGING DAY. Wide-ranging day (top to bottom) upward breakout The upward bias of the stock market seems to be a better trend
with and without a trend filter; downward breakouts with and without a trend filter. indicator. Applying the trend filter to the downward gaps did
not improve returns.
Wide-ranging day
A wide-ranging day does not need to be an outside day, only Conclusions
a very volatile one, 50% bigger than the average range. We go Trading would be easy if all of these patterns were profitable.
long if the close is in the upper 25% of the range and sell short But the stock market is biased to the upside, so it is not surpris-
if the close is in the lower 25% of the range. ing that upward breakouts (bull moves) are more successful.
Although individual stocks show a profitable average, all
results are very small. Adding a trend improved results in
some places and lowered results in others, as shown in Figure
10. Overall, this pattern is not working, or our breakout rule In addition to the results of
is wrong. these patterns, I will also
Gap openings apply an 80-day moving
And now for our old friend, the gap opening. We want to believe average trend filter, typical of
that a gap opening, at least a large one, is important. We defined a macrotrend system.
our minimum gap as 50% of the 20-day average true range, so
that a stock trading at $100 with an ATR of $2.00 will need to
https://libta.org
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
HARRY PLOSS, as Trustee for the HARRY PLOSS TRUST

DTD 8/16/1993, on behalf of himself and a proposed class, et al., No. 1:15-cv-02937
Plaintiffs Judge John F. Kness
v.
KRAFT FOODS GROUP, INC. and MONDELĒZ GLOBAL LLC,
Defendants
SUMMARY NOTICE OF PENDENCY OF CLASS ACTION

TO: All persons and entities who purchased a Chicago Board of Trade (“CBT”) December 2011 soft red wheat futures contract or a
CBT March 2012 soft red wheat futures contract after October 31, 2011, or sold a put option or purchased a call option on one or
both of these contracts after October 31, 2011. The precise definition of the certified class appears below.
If you are a clearing firm, futures commission merchant, brokerage firm or trustee through which CBT December 2011 soft red wheat
futures contracts or CBT March 2012 soft red wheat futures contracts were traded after October 31, 2011, or through which put options
were sold or call options were purchased on one or both of these futures contracts after October 31, 2011, please provide the name(s) and
last known address(es) of such customers to the Notice Administrator, A.B. Data, Ltd. at the address listed below within one week of
receiving this Notice. Alternatively, you may mail or email copies of this Notice to such persons or entities that are members of the Class
within two weeks of receiving this Notice. Please preserve your clients’ transaction records in CBT December 2011 and CBT March 2012
soft red wheat futures contracts (and options on such futures contracts) traded after October 31, 2011.
This Summary Notice seeks to alert you to a certified class action lawsuit called Ploss v. Kraft Foods Group, Inc. et al., Case No.
1:15-cv-02937, pending in the United States District Court for the Northern District of Illinois in Chicago before the Honorable John F.
Kness. Plaintiffs Harry Ploss, Richard Dennis, Budicak Inc., Joseph Caprino, Kevin Brown, White Oak Fund LP, and Robert Wallace
(collectively, “Plaintiffs”) brought a lawsuit on behalf of themselves and other similarly situated persons against Kraft Foods Group, Inc.
and Mondelēz Global LLC (collectively, “Kraft”).
The lawsuit alleges that Kraft manipulated the prices of the CBT December 2011 soft red wheat futures contract (“CBT December 2011
Contract”) and the CBT March 2012 soft red wheat futures contract (“CBT March 2012 Contract”) by buying and maintaining a 3,000 contract
position (approximately 15 million bushels) in the CBT December 2011 Contract for the purpose of influencing prices, rather than because of
any legitimate need for that quantity of wheat. Plaintiffs assert claims against Kraft under the Commodity Exchange Act, 7 U.S.C. §1 et seq.
(“CEA”), the Sherman Antitrust Act, 15 U.S.C. § 2, et seq. (“Sherman Act”) and the common law regarding unjust enrichment.
Kraft denies that it did anything wrong and asserts that Plaintiffs’ claims have no merit. Kraft asserts that its futures position was well within
applicable limits, and did not impact any futures prices throughout November 2011 or thereafter. Kraft also asserts there was nothing
improper about standing for delivery in the futures market given that cash market prices were high and Kraft had a real need for wheat.
The Court has appointed the lawyers listed below to represent the Class in this lawsuit (“Class Counsel”). You may hire your own lawyer
to appear in Court for you, but if you do, you are responsible for paying that lawyer.
Christopher Lovell Vincent Briganti
Christopher McGrath Raymond Girnys
LOVELL STEWART HALEBIAN LOWEY DANNENBERG, P.C.
JACOBSON LLP 44 South Broadway, Suite 1100
500 Fifth Avenue, Suite 2440 White Plains, New York 10601
New York, New York 10110 Telephone: (914) 997-0500
Telephone: (212) 608-1900
WHO IS A MEMBER OF THE CLASS?
The Class certified by the Court is defined as all persons or entities who either:
a. purchased a CBT December 2011 Contract or a CBT March 2012 Contract after October 31, 2011 except that purchases of
CBT March 2012 Contracts made after December 14, 2011 qualify for inclusion in the Class only to the extent they were made
in liquidation of a short position in the CBT March 2012 Contract (whether an outright short position or as part of a spread
position) which was sold between November 1 and December 14, 2011 inclusive; or
b. sold put options or purchased call options on the CBT December 2011 Contract or on the CBT March 2012 Contract after
October 31, 2011 except that sales of put options or purchases of call options on the CBT March 2012 Contracts made after
December 14, 2011 qualify for inclusion in the Class only to the extent they were made in liquidation of a position in the CBT
March 2012 Contract (whether an outright position or as part of a spread position) which was initiated between November 1 and
December 14, 2011 inclusive.
Excluded from the Class are Cargill, Inc., the Defendants and any parent, subsidiary, affiliate or agent of any Defendant.
YOUR LEGAL RIGHTS AND OPTIONS IN THIS LAWSUIT

If you are a member of the Class, you will need to decide whether to (a) remain in the Class or (b) request to be excluded from the Class.
To remain in the Class, you do not need to do anything at this time. If you remain in the Class, you will give up the right to file (or continue)
Continued on Next Page
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Continued from Previous Page
SUMMARY NOTICE OF PENDENCY

OF CLASS ACTION Because the index ETFs include a large set of stocks, we would
your own lawsuit or seek any other form of resolution of claims expect them to be less volatile, but when they gap open, have an
you might have against Kraft concerning the claims in this island reversal, or break out of a compression formation, they
lawsuit, and you will be legally bound by all court orders, tend to reflect a broader economic event.
judgements, or settlements approved by the Court. If money or Island reversals, gaps, outside days, and key reversals are best
benefits are obtained for the Class as a result of judgment or
settlement, you may be entitled to share in a portion of such with stocks because of their higher volatility.
money or benefits. If money or benefits are obtained in this While the gains from any one of these patterns may be small,
class action, the Class will be separately notified as to how to they are not likely to occur on the same day, so you can trade
make a claim to participate and request a share of any money or
more than one pattern and add the returns together. Be sure
benefits recovered for the Class.
to test these yourself. The more volatile stocks offer the best
Class members may be required to produce trading records for opportunities.
all accounts in which they have a financial interest, showing all
trades in the CBT December 2011 or March 2012 Contracts
made after October 31, 2011. Class members should preserve Perry J. Kaufman is a trader and financial engineer. He is
records of their transactions in CBT December 2011 and CBT the author of many books on trading and market analysis,
March 2012 Contracts (and options on such futures contracts) including the new sixth edition (2020) of Trading Systems and
traded after October 31, 2011 (including any monthly
statements for October 2011). Class members should also Methods (with the first edition published in 1978 as a seminal
preserve records of any purchases and/or sales of physical book in the field of technical analysis), and the newly released
wheat in the cash market between November 1, 2011 and Kaufman Constructs Trading Systems (2020). For questions or
March 14, 2012.
comments, please go to www.kaufmansignals.com.
If you do not want to participate in this lawsuit, you can opt out
of the Class and request to exclude yourself. If you choose to The code given in this article is available in the Article Code
exercise your right to opt out of the Class, you will not be
bound by any court orders, judgments, jury verdicts, or section of our website, Traders.com.
settlements approved by the Court, but you keep your right to
sue or otherwise resolve your potential claims against Kraft on See our Traders’ Tips section beginning on page 46 for com-
your own. If you opt out, you cannot make a claim against any mentary and implementation of Perry Kaufman’s technique in
money or benefits that might be recovered by the Class from
Kraft in a settlement or as a result of a judgment, if any. various technical analysis programs. Accompanying program
code can be found in the Traders’ Tips area at Traders.com.
To opt out of the Class, you must mail, e-mail or submit
through the case website a written statement to A.B. Data,
Ltd. (mailing address, e-mail address and case website Further reading
address referenced below) no later than February 11, 2021 Bulkowski, Thomas N. [2005]. Encyclopedia Of Chart Patterns,
stating: (1) you are a member of the Class in Ploss v. Kraft 2nd. Edition, Wiley Trading.
Foods Group, Inc. et al. and (2) you request to be excluded
from the Class. Your written request for exclusion must also [2016]. Chart Patterns: After The Buy, Wiley Trad-
include your full name, address, telephone number, e-mail ing)
address (if any) and signature. A sample opt-out form is Kaufman, Perry J. [2020]. Kaufman Constructs Trading Systems
available on the case website address referenced below. The (print and ebook editions), Amazon.
Court will exclude from the Class any member who submits a
valid and timely request for exclusion. [2020]. Trading Systems and Methods, 6th Edition,
Wiley.
2011 Wheat Futures Class Action
Exclusions [2003]. A Short Course In Technical Trading, Wiley.
c/o A.B. Data, Ltd. [1995]. Smarter Trading, McGraw-Hill.
P.O. Box 173001
Milwaukee, WI 53217 ‡TradeStation
877-883-8949
info@2011wheatfuturesclassaction.com ‡See Editorial Resource Index
HOW CAN I GET MORE INFORMATION?

EASYLANGUAGE CODE FOR PRICE PATTERNS
If you have questions related to this lawsuit, your rights or wish WITH AND WITHOUT TREND FILTER
to review other documents related to this lawsuit, you may visit
www.2011wheatfuturesclassaction.com or call 877-883-8949. // PJK Short-Term patterns
You may also contact Class Counsel with any questions. // Look at reliability of short-term patterns with and without a
// trend filter.
PLEASE DO NOT CALL OR CONTACT // Look at using noise as a qualifier
// Copyright 2020, P.J.Kaufman. All rights reserverd
THE COURT OR THE CLERK’S OFFICE
inputs: trendper(0), usekeyreversal(false),
REGARDING THIS NOTICE OR FOR useislandreveral(false), usecompression(0),
ADDITIONAL INFORMATION. usegaps(0), useoutsideday(false), usewideranging-
QUESTIONS? day(0), forecast(5),
VISIT www.2011wheatfuturesclassaction.com investment(10000);
or CALL 877-883-8949 TOLL FREE vars: trend(0), pattern(" "), bullcases(0), bearcases(0),
keyreversal(false), islandreversal(false),

https://libta.org
compression(false), bulltrend = true;
gap(false), outsideday(false), widerangingday(false), bulltrendcases = bulltrendcases + 1;
bullpattern(false), end;
bearpattern(false), bulltrend(false), beartrend(false), bull- end;
trendcases(0), end;
beartrendcases(0), cday(0), comphigh(0), // compression =====================================
complow(0), outsidebull(false), outsidebear(false), ratio(0), if usecompression > 0 and ndays = 0 then begin
ndays(0), ix(0), lookahead(0), adate(" "), size(0), back1(0), pattern = "3-Day compression";
back2(0), back4 = truerange[4];
back3(0), back4(0); back3 = truerange[3];
arrays: bullreturns[6](0), bearreturns[6](0), bulltrendreturns[6](0), back2 = truerange[2];
beartrendreturns[6](0); back1 = truerange[1];
// trend compression = back4 > back3 and back4 > back2 and back4
if trendper > 0 then begin > back1;
trend = average(close,trendper); if compression then begin
end; comphigh = highest(high[1],usecompression);
// 3-day compression complow = lowest(low[1],usecompression);
if usecompression = 3 then begin // bearcases compression
cday = truerange[3]; if close < complow then begin
compression = truerange < cday and truerange[1] < cday ndays = 1;
and truerange[2] < cday; bearcases = bearcases + 1;
end; bearpattern = true;
// key reversals =================================== size = investment/close;
if usekeyreversal and ndays = 0 then begin if trend < trend[1] then begin
keyreversal = true; beartrend = true;
pattern = "Key Reversal"; beartrendcases = beartrendcases + 1;
// without trend end;
// key bearcases reversal end
if high > high[1] and low < low[1] and close < low[1] then // bullcases island reversal
begin else if close > comphigh then begin
ndays = 1; ndays = 1;
bearcases = bearcases + 1; bullcases = bullcases + 1;
bearpattern = true; bullpattern = true;
size = investment/close; size = investment/close;
if trend < trend[1] then begin if trend > trend[1] then begin
beartrend = true; bulltrend = true;
beartrendcases = beartrendcases + 1; bulltrendcases = bulltrendcases + 1;
end; end;
end end;
// key bullcases reversal end;
else if high > high[1] and low < low[1] and close > high[1] end;
then begin // Outside day (or wide ranging day) with close in upper/lower
ndays = 1; // 25% ===========================================
bullcases = bullcases + 1; if (useoutsideday or usewiderangingday <> 0) and ndays = 0
bullpattern = true; then begin
if trend > trend[1] then begin if useoutsideday then pattern = "Outside Day"
bulltrend = true; else pattern = "Wide Ranging Day";
bulltrendcases = bulltrendcases + 1; outsidebull = high > high[1] and low < low[1] and close >
end; 0.75*(high - low) + low;
end; outsidebear = high > high[1] and low < low[1] and close <
end; 0.25*(high - low) + low;
// island reversals ================================= ratio = 0;
if useislandreveral and ndays = 0 then begin if usewiderangingday <> 0 then begin
keyreversal = true; ratio = truerange/avgtruerange(20);
pattern = "Island Reversal"; end;
// without trend // bearcases outside day
// bearcases island reversal if outsidebear and (ratio = 0 or ratio > usewiderangingday)
if low > high[1] and close < open then begin then begin
ndays = 1; ndays = 1;
bearcases = bearcases + 1; bearcases = bearcases + 1;
bearpattern = true; bearpattern = true;
size = investment/close; size = investment/close;
if trend < trend[1] then begin if trend < trend[1] then begin
beartrend = true; beartrend = true;
beartrendcases = beartrendcases + 1; beartrendcases = beartrendcases + 1;
end; end;
end end
// bullcases island reversal // bullcases island reversal
else if high < low[1] and close > open then begin else if outsidebull and (ratio = 0 or ratio > usewideranging-
ndays = 1; day) then begin
bullcases = bullcases + 1; ndays = 1;
bullpattern = true; bullcases = bullcases + 1;
size = investment/close; bullpattern = true;
if trend > trend[1] then begin size = investment/close;

https://libta.org
if trend > trend[1] then begin if ndays > 0 then begin
bulltrend = true; ndays = ndays + 1;
bulltrendcases = bulltrendcases + 1; end;
end; // summary
end; if lastbaronchart then begin
end; adate = ELdatetostring(date);
// Gap opening with profits in the direction of the gap ====== print(file("c:\tradestation\Short-Term Patterns.csv"),
if usegaps > 0 and ndays = 0 then begin "Date,Pattern,Cases,Bull Cases,BullPL1,BullPL2,BullPL
pattern = "Gap Opening"; 3,BullPL4,BullPL5,Bear Cases,",
ratio = (open - close[1])/avgtruerange(20)[1]; "BearPL1,BearPL2,BearPL3,BearPL4,BearPL5,,Trend
// downward gap Cases,",
if ratio < 0 and -ratio >= usegaps then begin "Bull Trend Cases,BullTrPL1,BullTrPL2,BullTrPL3,BullTr
ndays = 1; PL4,BullTrPL5,",
bearcases = bearcases + 1; "Bear Trend Cases,BearTrPL1,BearTrPL2,BearTrPL3,B
bearpattern = true; earTrPL4,BearTrPL5");
size = investment/close; print(file("c:\tradestation\Short-Term Patterns.csv"),adate, ",",
if trend < trend[1] then begin pattern, ",",
beartrend = true; bullcases+bearcases:8:0, ",", bullcases:8:0, ",", Bullre-
beartrendcases = beartrendcases + 1; turns[2]:8:0, ",", Bullreturns[3]:8:0, ",",
end; Bullreturns[4]:8:0, ",", Bullreturns[5]:8:0, ",", Bullre-
end turns[6]:8:0, ",",
// bullcases island reversal bearcases:5:0, ",", Bearreturns[2]:8:0, ",", Bearre-
else if ratio >= usegaps then begin turns[3]:8:0, ",",
ndays = 1; Bearreturns[4]:8:0, ",", Bearreturns[5]:8:0, ",", Bear-
bullcases = bullcases + 1; returns[6]:8:0, ",,",
bullpattern = true; bulltrendcases+beartrendcases:5:0, ",", bulltrendcas-
size = investment/close; es:5:0, ",", Bulltrendreturns[2]:8:0, ",",
if trend > trend[1] then begin Bulltrendreturns[3]:8:0, ",",
bulltrend = true; Bulltrendreturns[4]:8:0, ",", Bulltrendreturns[5]:8:0, ",",
bulltrendcases = bulltrendcases + 1; Bulltrendreturns[6]:8:0, ",",
end; beartrendcases:5:0, ",", Beartrendreturns[2]:8:0, ",",
end; Beartrendreturns[3]:8:0, ",",
end; Beartrendreturns[4]:8:0, ",", Beartrendreturns[5]:8:0,
// accumulated profits over next 5 days ================== ",", Beartrendreturns[6]:8:0);
if ndays > 1 then begin end;
if bullpattern then bullreturns[ndays] = bullreturns[ndays] + // end of trade
size*(close - close[ndays-1]); if ndays > 6 then begin
if bearpattern then bearreturns[ndays] = bearreturns[ndays] bullpattern = false;
+ size*(close[ndays-1] - close); bearpattern = false;
if bulltrend then bulltrendreturns[ndays] = bulltrend = false;
bulltrendreturns[ndays] + size*(close - close[ndays-1]); beartrend = false;
if beartrend then beartrendreturns[ndays] = ndays = 0;
beartrendreturns[ndays] + size*(close[ndays-1] - close); end;
Algo Q&A
end;
DAVEY To further confuse the issue, not all

Continued from page 7 data vendors do what TradeStation does. For algo traders relying
Some vendors use last price traded for on accurate backtesting
closing prices, and ignore the settlement
1440-minute bar close is the last price prices.
and real-time signal
traded, and the daily bar close is the daily All this is a long way of explaining generation, it can be
settlement price. Some days the differ- why you had a gold signal suddenly critical to understand
ence is small, other days it is huge. But, change on you. the “last vs. settlement
it is almost never exactly zero. Now admittedly, for many traders, this
Take August 19 as an example. The issue might seem trivial. But for algo
closing price” issue.
1440-minute bar has a close of 1934.2, traders relying on accurate backtesting
while the daily settlement price was and real-time signal generation, it can you consistently use the same approach
1970.3, a difference of 36.1, over $3,600 be critical to understand the “last vs. in your studies.
per contract! What happened here? settlement closing price” issue. A data issue like this is just one of
As shown in Figure 2, the price of gold The workaround for this issue is to the many tricks and pitfalls that algo
plummeted in the last few hours of the make sure you understand what data you traders can fall into. It definitely pays to
trading day, after the settlement time. have before testing and trading. You can understand your data before backtesting
So the 1440-minute and daily bars are use either last price or settlement price and trading.
dramatically different. and get correct calculations, as long as
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Keeping The Momentum Going
Semi-Annual Gold Momentum

Strategy: International Evidence
If you find an investing strategy with an edge, it’s worth strategy semi-annually, or every six months, as follows:
looking to see if you can broaden the strategy for more op-
portunities. Here, we’ll revisit the gold momentum strategy to • If the S&P 500 index performed better than gold in a
test it on some worldwide markets this time. We think you’ll six-month period, then in the next six-month period,
like the results. invest in the S&P 500
• If gold performed better in a six-month period, for the
by Massoud Metghalchi, PhD, with Ahsan Baig next six-month period, invest in gold.
In
the December 2019 issue of Technical Analy- This assumes that a trader can estimate the returns of the
sis of Stocks & Commodities, an article by stock index and gold bullion a few minutes before the end
Robert Tang proposed a yearly-based gold of the six-month period, and that based on the performance
momentum strategy as follows: If the S&P of the stock index and gold bullion, the trader buys the best
GOLD DRAGON: HELLORF ZCOOL/EURO CONTINENT: HARVEPINA
500 index performed better than gold in the performer at the close of the last day of the sixth month. This
current year, then in the next year, invest in the process is repeated every six months.
S&P 500; but if gold performed better, then
the next year, invest in gold. Broadening the opportunities:
(For his article, Tang used S&P 500 index data from Yahoo An international look
Finance and gold spot price from TheBalance.com. He further For this article, we will apply the gold momentum strategy
COLLAGE: CHRISTINE MORRISON
tested his strategy using SPY and GLD ETFs from 2006 to (GMS) semi-annually to several stock market indexes in in-
2018, which showed similar results as for the index data.) dustrialized countries, as well as to some well-known world
Then, in the May 2020 issue of Technical Analysis of indexes, in addition to the S&P 500 index.
Stocks & Commodities, in my article “Variations On The The stock indexes we will use are: Britain’s FTSE 100,
Gold Momentum Strategy,” I applied Tang’s gold momentum France’s CAC 40, Germany’s DAX30, Switzerland’s SMI,
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TRADING STRATEGIES
Spain’s IBEX, Netherland’s AEX, Japan’s TOPIX, and the Annual Returns and Standard Deviation (%) 1992–2019
S&P 500. The well-known indexes we will use are Dow Country Index Gold GMS
Jones’s Euro Stoxx 50, MSCI’s Emerging Market, MSCI’s France
Return 7.06 7.49 8.07
EAFE, and Dow Jones’ World Index. The index data are 22.00 13.52 14.08
Stnd. Deviation
10.60 7.49 11.75
taken from Thomson Reuters’ DataStream from 1992 to 2019.
Return
Germany
Stnd. Deviation 21.28 13.52 17.24
The London gold bullion prices are taken from the Federal Return 2.80 5.60 6.86
DATA FROM THOMSON REUTERS DATASTREAM

Reserve Bank of Saint Louis. Each country’s price index is in Japan
Stnd. Deviation 20.97 10.97 14.19
the local currency. The MSCI indexes and the DJ world index Netherlands Return 6.79 6.93 13.85
prices are in US dollar (USD) currency, and the Euro Stoxx 1994–2019 Stnd. Deviation 19.55 13.64 14.46
9.12 7.49 12.87
50 index is in euro currency. The Federal Reserve Bank of
Return
Spain
Stnd. Deviation 25.19 13.52 19.65
Saint Louis provides gold bullion prices in USD, euro, and Return 7.59 5.38 7.76
pound sterling. Switzerland
Stnd. Deviation 17.07 11.96 14.42
Return 4.62 7.70 9.19
UK
Individual industrialized countries results Stnd. Deviation 13.43 13.71 12.61
In the table in Figure 1, we present our results for individual FIGURE 1: GOLD MOMENTUM STRATEGY, RESULTS FOR INDIVIDUAL INDUS-
TRIALIZED COUNTRIES. Shown here is the risk-return trade-off for the test on
industrialized countries. individual countries and the semi-annual gold momentum strategy.
Note: For France, Germany, the Netherlands, and Spain, the
country index and gold bullion index are in euro currency. Annual Returns and Standard Deviation (%) 1992–2019
For Japan, the Topix price index is in the local currency, yen; World Index Gold GMS
DJ Euro Stoxx Return 7.11 7.49 12.38
the gold bullion price index was converted to yen by using 50 Stnd. Deviation 18.80 13.52 15.16
the Datastream exchange rate between the US dollar and yen. Return 8.10 6.23 5.78
Similarly, for Switzerland, the SMI index is in local currency, MSCI EM
Stnd. Deviation 25.46 11.79 19.11
the Swiss franc, and the gold bullion index price has been MSCI EAFE
Return 5.29 6.23 6.66
converted from USD to Swiss francs. Stnd. Deviation 17.02 11.79 11.42
Let’s discuss the French case. If a trader followed the ef- 7.09 6.23 10.43
Return
DJ World Index
Stnd. Deviation 14.95 11.79 10.22
ficient market hypothesis (EMH), the trader would buy and Return 8.72 6.23 14.47
hold (B&H) the CAC 40 index; her average annual return S&P500 Index
Stnd. Deviation 13.95 11.79 10.72
would be 7.07 % over the 1992–2019 period with an annual FIGURE 2: GOLD MOMENTUM STRATEGY, RESULTS FOR WORLDWIDE IN-
standard deviation (risk) of 22.00%. If this trader only invested DEXES. Shown here is the risk-return trade-off for various world indexes and the
in gold, her annual average return would have been 7.49% semi-annual gold momentum strategy.
with a risk factor of 13.52%. Over this period, the gold return
has approximately the same return as the CAC 40 but has Worldwide index results
lower risk. However, if this trader followed the semi-annual In the table in Figure 2, we present the risk-return trade-off
GMS, this trader would have made an annual average return for various world indexes and the semi-annual GMS.
of 8.07% with an annual standard deviation of 14.08%. The As we can see from Figure 2, if a trader follows the EMH
risk-return trade-off for this trader using the semi-annual and buys and holds the DJ Euro Stoxx 50 in euro currency,
GMS would be better than that of the CAC 40, with higher her average annual return over the 1992 to 2019 period would
return and lower risk. have been 7.11% with a measure of risk of 18.80%. Investing
For Germany, we reach a similar conclusion: The B&H in gold in euros would have generated an annual average
strategy has an annual average return of 10.60% with an an- return of 7.49 % and a risk of 13.52%. However, if this trader
nual standard deviation of 21.28%, all in local currency, the switched every six months between the index and gold bul-
euro. Meanwhile, the semi-annual GMS for Germany has lion index, this trader would have made an annual average
higher return (11.75%) and lower risk (17.24 %) than the B&H of 12.38 % and a risk measure of 15.16%. The semi-annual
strategy for the DAX30 index.
The conclusion is the same for the Netherlands, Spain,
Switzerland, Japan, and the UK, in that a trader following the Continued on page 37
semi-annual GMS could beat the B&H strategy, all in local
currency. The gain is very high for the Netherlands, Japan,
and the UK.
It should be noted that the annual average returns and the Looking at the S&P 500 index
annual standard deviation of returns are estimated from semi-
annual returns. The estimations are as follows:
test results, we see a very
significant improvement in the
Annual average = (1 + semi-annual average)2 - 1 risk-return trade-off.
Annual standard deviation = s emi-annual standard deviation
* SQRT(2)
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Have No Fear
Managing Trading Fear

And Stress
Keeping emotion out of your trading decisions is always an losses). The danger can be real or imagined; the brain can-
important part of managing your trading. Understanding the not distinguish between the two. Its close cousins, stress and
biological processes behind our reactions to stimuli can help anxiety, mimic fear in several ways. Stress is a reaction to
us find ways to counter unproductive emotions. excessive pressures or demands. Anxiety is the dread one
feels when thinking about a potential threat; one which has
by Stella Osoba not yet and may not materialize. It is the perception of and
F
the belief in the imminence of the danger in all cases that
ear is the one universal emotion that torpedoes many is important.
traders’ accounts. Unmanaged fear is the reason When it comes to trading, fear can arise as we debate whether
traders will often eventually quit trading. Fear is the to enter, stay in, or exit a position. The idea of trading losses is
underlying cause of many mistakes and countless always very real, and for many of us it is often uppermost in
unforced errors traders will make. Fear permeates our minds. We come to trading with the plan to make profits
our conscious and subconscious mind. and to take money out of the market on a consistent basis. If
All humans have an amygdala, which is thought to be the we are very good at it and very lucky, the hope is that not only
brain’s emotion center that governs our fear response. Thus, will we make money but also become rich in the process. For
we may not be able to dispose of all fear, but we can learn to many, that plan never comes to fruition, and one reason for
manage it intelligently so that it does not overwhelm us and that is the handicap that fear exposes.
thereby sink our trading accounts. It is therefore essential that if we are to not only stay in this
trading game but also prosper, we must come to terms with the
RYZHI/SHUTTERSTOCK
What is fear? idea of fear and its role in our lives. We must learn to manage
Fear can be defined as an unpleasant emotional feeling it and minimize its harmful expressions if we want to attain
triggered by the perception of danger (in our case, trading optimum trading results.
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TRADING PSYCHOLOGY
The biology of fear

Fear is an emotion that first appears as a thought in the
thinking mind. We perceive something, and thinking gives it Fear is an emotion that first
meaning. That meaning begins the process by which a series
of chemical reactions interpret what had first appeared in our
appears as a thought. We
minds as a thought. Say for instance we are walking down a perceive something, and
darkened street and see an object move in front of us. At first, thinking gives it meaning.
we perceive it as possibly something that could be danger-
ous to us. The thoughts we ascribe to the situation before us
causes us to feel fear. That feeling causes a series of chemical
reactions to take place in the brain, weakening some network might have developed as a mechanism to protect us from
connections and strengthening others. dangers seen in nature such as a snake about to bite or a bear
The area in the front of the brain behind the cranium is called about to attack. As we evolved, it was important for us to
the prefrontal cortex. This area is thought to govern executive be able to perceive a threat quickly and react to it, in order
functions like short-term working memory, decision-making, to survive. This takes precedence over the deliberate, slow-
and so on. When we feel fear, the chemical reactions in the processing prefrontal cortex, which might make complex
brain cause the prefrontal cortex to shut down. Chemical cognitive calculations about the likelihood of a snake bite
messengers—neurotransmitters—send a message to the older killing us, or the best way to pacify a bear.
regions at the back of the brain, such as the amygdala, that This brings us to the next problem. In our highly developed
cause it to take over, triggering a panicked tide of emotion. present-day reality, we are far less likely to face the possibil-
Chemicals such as dopamine and norepinephrine switch off ity that we may be eaten by a lion and far more likely to face
circuits in the prefrontal area required for higher cognition, problems that require higher-level cognitive abilities to resolve.
while norepinephrine and cortisol cause the hypothalamus The very same areas of the brain that tend to shut down during
and other earlier evolved structures such as the amygdala to periods of stress or fear are the same areas of the brain that
alert the rest of the nervous system to prepare for danger. This we need to solve many of the problems that confront us in
floods us with memories that are related to fear. our more highly evolved everyday realities. Our modern-day
The moment we realize that the object that moved in the stresses most often involve situations that require us to make
darkness on the street was simply a barrel being rolled by the choices with thoughtful, deliberative analysis instead of with
wind, we relax, and this causes enzymes to chew up those “fight-or-flight-or-freeze” reactions.
neurotransmitters, so that the shutdown does not persist. We
then quickly return to our baseline, as the fear abates. Stress: Chronic and acute
The effect of stress on the brain is much like that of fear.
Thoughts are “ things” Stress can be acute or chronic. Both affect the functioning
The example just given is a simple illustration of why thoughts of our brain. Both acute stress and chronic stress lead to
are, in a very real sense, things. They exist in a physical way. alterations in the brain’s architecture, although the effects of
Thoughts control how our brains will react to outside stimuli. chronic stress are much more extensive and permanent than
Thoughts control the creation and amount of particular chemi- for acute stress.
cals created in our brains. Thoughts control how one region When we are unstressed, the circuitry in the brain connecting
of the brain talks to another region of our brain. Thoughts the prefrontal cortex and amygdala hum along contentedly.
control what region of the brain is currently in control or Our prefrontal cortex, or the executive center of the brain,
dominant and therefore how we are receiving and processing allows us to keep our baser emotions and impulses in check.
information from our environment. But studies have shown that keeping the circuitry of the brain
And what we perceive does not have to be true in order functioning as it should is a fragile process.
for the chemicals in our brains to trigger and react. We may Even low levels of stress can create imbalances in the
in fact be perceiving information incorrectly and still end neurochemical environment in the brain. This imbalance
up with our amygdala on full alert, emotions taking control. weakens network connections, which in turn floods our brain
Rational thought, which is handled by our prefrontal cortex, with arousal chemicals that are released by neurons in the
is shutting down. brain stem. As these signaling chemicals become elevated
Researchers cannot know definitively why the brain evolved in the prefrontal cortex, they shut off neuron firing as the
exactly the way it has. Why is it that our highest cognitive connection point between neurons is weakened. This causes
functions are weakened at the first signs of stress or fear? network activity in the brain to decline. When this happens,
Why, during periods of stress or fear, does our orchestration the ability to regulate behavior is reduced. Oftentimes, our
of responses shift from the prefrontal cortex to the more unforced trading errors can be linked to periods when we
primitive regions at the back of the brain? are under stress. Even small amounts of stress can affect our
The more primitive areas near the brain stem can turn on decision-making.
a dime and set in motion the “fight-or-flight” response. This Thus, when it comes to the myriad of factors we have to
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ment, whether good or bad. It means cultivating the ability to
stay present, with an open mind and no concern or judgement
Oftentimes, our unforced about how you are doing in the moment.
Most of the time we are not in the present, we are not being
trading errors can be mindful; we are either on autopilot or we are thinking about
linked to periods when we the past or the future. So for most people, the ability to stay
were under stress. mindful will take some work. But the ability to be mindful
with some regularity allows you to begin to see the habitual
pattern of negative thoughts and feelings that cause you to react
in ways that hurt your trading and cause you to experience
observe and process in order to make trading decisions, to stress and/or fear. Being mindful of negative thought patterns
be able to handle them well and stay on task, we want to can help you learn to avoid falling into these patterns. And
reduce stressors and control our sense of fear that can give this can help you to control your reactions.
rise to stress.
Why you must sell to the sleeping point
Cultivating a sense of control It is much easier to practice mindfulness if we have prepared
Studies have shown that one of the best ways of counter- ourselves for market plunges by not carrying risk of ruin or
ing the negative effects of fear and stress is to cultivate the almost-ruin positions in the first place. We must ensure that
belief that you have a sense of control over your immediate our position sizing is not too large for the size of our accounts
environment and over the choices available to you. In order so that whatever happens, we can weather the loss.
to believe this, it is essential that you rehearse the very con- Pioneer trader Jesse Livermore tells a story, which he at-
ditions that you fear happening, and rehearse what you will tributes to Dickson G. Watts, that illustrates this point. The
do in those situations. Training yourself to handle fearful story was about a man who was very nervous. When his friend
situations can be habit-forming, and habits can change the asked him what the matter was, he said:
circuitry of the brain. “I can’t sleep.”
How does this work? Again, it is your thoughts that actually “Why not?” the friend asked.
trigger signals in the brain. These signals are neurotransmitters “I am carrying so much cotton that I can’t sleep thinking
in the prefrontal cortex communicating with the amygdala. about it. It is wearing me out. What can I do?”
And your thoughts are not what is actually happening in your “Sell down to the sleeping point,” replied the friend.
environment; rather, your thoughts are your reaction to what The moral of the story is to avoid doing anything that can
is happening in your environment. and will interfere with your sense of equanimity and that will
Say for instance that you are in the market and get caught keep you up at night. Trading is hard enough; don’t make it
up in a nasty market reaction. You may panic and feel fear, any harder by allowing the chemicals in your brain to join
and the brain will react by shutting down the prefrontal cor- forces in the fight against your success.
tex as the amygdala floods the brain with chemicals such as
catecholamine. That is the opposite of what you need to have The only thing to fear is fear itself?
happen to competently handle the situation that has arisen. The brain is a very powerful organ. It is made up of around
You are no longer capable of rational thought. 100 billion neurons. These neurons transmit messages to one
Instead, as fear grips you, you might recall past instances another through a process resulting in the release of neu-
when you were fearful, and then you make highly emotional rotransmitters. Neurotransmitters are chemical messengers
decisions. You wind up selling out of your positions in a panic, that speak to the neurons, causing a specific response in the
or you do nothing. Either way, you are not making calm, receiving neuron. The neuron is activated by the thoughts we
rational decisions. At this point, you may fail to see signals produce to communicate through the neurotransmitter with
that could alert you as to the best course of action to take. other neurons. Sometimes neurotransmitters will stimulate
Maybe there was buying late in the day, pointing to a market neurons, making them more active, and other times the neu-
reaction as opposed to the start of a trend reversal. Because of rotransmitters will inhibit neurons, making them less active.
the high levels of chemicals released during stress, the brain What the neurons do depends on the signal that is received
switches from the slower, more analytical regulation that is through your thoughts.
performed by the prefrontal cortex to the rapid-fire, reflexive Much is still unknown about how this complex organ called
response from the amygdala. Your emotions are now dictat- the human brain works, but research has shown that neurons
ing your reactions. control everything we do. It can therefore be liberating to
know that we are in control. That is, we can choose to think
Mindfulness the thoughts that will maximize our potential for right action
Mindfulness is focused attention. It is bringing our thoughts when we trade. We can take control when we experience pe-
to the present and staying there without judgment. It means
accepting what is happening in the present, moment by mo- Continued on page 56
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Outperforming In The Midcap Space
ETF Midcap Growth Investing

One group of stocks with market-beating performance over three major investment categories over the past decade.
the past decade has been midcap growth stocks. ETFs provide Figure 1 shows the performance of the three capitalization
a way to invest in a basket of stocks in this or other catego- (“cap”) sizes against market averages. Clearly, midcap and
ries. Here’s a look at a handful of ETFs in this category to large-cap have run neck and neck, both way ahead of the
consider. S&P 500 and Dow Jones Industrials. Meanwhile, small-caps
have underperformed.
L
by Leslie N. Masonson
Midcap ETF background
ong-term and intermediate-term investors are The midcap ETF arena contains stocks with a market cap of
always looking for areas of the market that offer between $2 billion to $10 billion, but can be further divided
consistent price performance with normal risk into three types: basic or “plain-vanilla,” growth, and value.
parameters. Market experts always try to pick next Interestingly, midcaps deliver the best characteristics of the
year’s winning category, but with limited success. capitalization sizes by offering higher growth rates than large-
One group of stocks that has seen market-beating caps, coupled with less volatility than small-caps.
performance over the past decade and intermediate periods SPDR S&P Midcap 400 (MDY) was the first midcap
has been midcap growth stocks. Here is a look at a handful ETF offered on May 5, 1995, followed by iShares Core S&P
of ETFs in that category to consider. Midcap’s birth on May 22, 2000. Next up were the triplets—
iShares Russell IWP, IRS, and IWS on July 17, 2001. Based
The midcap space on their early start, these five ETFs have amassed the most
KENG MERRY DIGITAL CRAFT/SHUTTERSTOCK
Investing in midcap stocks, as well as midcap equity ETFs AUM, in addition to Vanguard Midcap (VO) in second place
and mutual funds, is often overlooked not only by the aver- with a later starting date of January 26, 2004.
age investor, but also sometimes by the mainstream financial To gain a broad perspective on two midcap key data points,
press. On the other hand, small-cap vehicles, and especially refer to Figure 2, which provides a list of the largest midcap
large-caps, have attracted most of the attention of retail and ETFs based on assets under management (AUM). The top 10
professional investors. Surprisingly, these “middle-of-the- midcap ETFs are listed in AUM order accompanied by their
road” midcaps have been very good performers among the multiyear performance, and type. A first glance at the table
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WHY TRADE ETFS?
indicates a wide variance in performance Total Return Ticker ETF Name Y-T-D 1 Year 3 Years 5 Years 10 Years
among these ETFs. But a closer look over 10 years
iShares Morningstar Mid-Cap
the past one, five, and ten years shows that 308.30% JKH
Growth ETF
28.51% 37.33% 20.73% 17.10% 15.07%
the worst performers have consistently iShare Morningstar Small-Cap
been the value EFTs followed by the basic 255.90% JKK
Growth ETF
19.59% 27.90% 13.96% 14.05% 13.54%
ETFs. However, the three growth-focused 366.60% JKE

iShare Morningstar LargeCap
26.90% 37.75% 22.16% 17.76% 16.65%
ETFs (that is, IWP, VOT, and IJK) have Growth ETF
consistently excelled in price performance, 249.40% SPY SPDR S&P 500 ETF Trust 7.00% 14.74% 12.03% 12.59% 13.32%
even outpacing the S&P 500 and Dow Jones 498.60% QQQ Invesco QQQ Trust 32.62% 44.43% 25.03% 21.05% 19.56%
Industrials. 218.81% DIA
SPDR Dow Jones Industrial
-1.12% 5.07% 8.14% 12.00% 12.09%
ETF Report magazine lists 19 basic US Average ETF Trust
FIGURE 1: ALL-CAP GROWTH ETFS VS. MARKET AVERAGES. Midcap and large-cap performance have
ETFs, plus 9 growth and 7 value EFTs. Four exceeded that of small-caps, the S&P 500, and Dow Jones Industrial Average over multiple time periods.
of their growth ETFs are labeled as S&P YTD midcap has been the leader.
400 midcap growth (that is, RFG, IVOG,
MDYG, and IJK), but they had inferior Name Ticker 1 Year 5 years 10 years AUM Type
($bill)
performance to the others in that category
iShares Core S&P Mid-cap IJH -1.5% 7.5% 10.3% $44.3 Basic
over five years, so they were excluded
from my analysis in this article. Therefore, Vanguard Midcap VO 6.5% 9.3% 1.6% $35.3 Basic
I retained JKH, NUMG, VOT, IWP, and iShares Russell Midcap IWR 4.4% 8.9% 11.3% $20.7 Basic
FNY as the top growth performers. Figure SPDR S&P Midcap 400 Trust MDY -1.6% 7.3% 10.1% $14.9 Basic
3 contains the names and tickers of the six iShares Russell Midcap Growth IWP 22.8% 14.4% 14.1% $13.3 Growth
reviewed ETFs. Note that I added Invesco iShares Russell Midcap Value IWS -7.3% 5.2% 9.2% $9.8 Value
S&P Midcap Momentum ETF (XMMO), a Vanguard Midcap Value VOE -8.1% 5.2% 9.8% $9.3 Value
broad-based ETF, from the “basic” grouping Vanguard Midcap Growth VOT 21.9% 13.3% 13.3% $8.5 Growth
to the mix because of its strong performance
iShares S&P Mid-cap Growth IJK 8.4% 9.3% 11.4% $6.8 Growth
over three years.
In summary, this article focuses on growth iShares S&P Mid-cap Value IJJ -12.4% 4.7% 8.9% $4.4 Value
ETFs that are the “best” in their category S&P 500 ETF Trust SPY 9.5% 11.6% 12.9% $280.9 N.A.
over a decade. SPDR DJ Ind, Average ETF Trust DIA -0.25% 11.0% 11.6% $22.4 N.A.
FIGURE 2: TOP 10 MIDCAP ETFS BY AUM. The growth category has clobbered not only the value ETFs
Midcap growth ETFs and the plain-vanilla basic ETFs over multiple timeframes, but also the S&P 500 and Dow Jones Industrial
Average. IWP, VOT, and IJK had the best performance.
For additional
transparency pur- ETF Name Ticker
poses, I’ve provid- iShares Morningstar Mid-Cap
ed a performance Growth ETF
JKH
comparison of the Nuveen ESG Mid-Cap Growth ETF NUMG
Midcaps deliver the best
top three ETFs iShares Russell Mid-Cap Growth characteristics of the
in each midcap ETF
IWP
capitalization sizes by
category in Fig- Vanguard Mid-Cap Growth ETF VOT
ure 4. As you First Trust Mid Cap Growth Alpha-
offering higher growth rates
can observe, the DEX Fund
FNY
than large-caps, coupled
best growth ETFs Invesco S&P MidCap Momentum
ETF
XMMO with less volatility than
vastly outperform FIGURE 3: MIDCAP GROWTH ETFS. Six growth small-caps.
the others in the ETFs evaluated in this article are shown with their
group. Data for names and ticker symbols.
the analysis of the
ETFs in this col- Performance JKH NUMG IWP VOT FNY XMMO VO IWR IWS VOE NUMV
Period
umn was provided
Year-to-Date 28.51% 26.68% 18.78% 18.51% 16.49% 14.80% 4.10% 1.88% -9.14% -9.77% -13.03%
by ETFAction.
com, a platform 1 Year 37.33% 33.78% 26.43% 25.27% 22.56% 20.69% 10.00% 7.85% -4.12% -4.74% -8.36%
that I reviewed 3 Year 20.73% 18.83% 16.70% 15.67% 14.14% 20.90% 8.87% 7.86% 1.85% 1.97% 1.33%
in the May 2020 5 Year 17.10% 15.04% 13.87% 14.04% 18.63% 10.03% 9.62% 5.92% 5.96% N.A.
issue of this maga- 10 Year 15.07% 14.44% 13.67% 14.43% 12.00% 11.62% 9.54% 10.09% N.A.
zine. Previously, Type of ETF Growth Growth Growth Growth Growth Basic Basic Basic Value Value Value
I used data from FIGURE 4: MIDCAP PERFORMERS OF ALL TYPES. Here, the best performers among the basic, value, and growth ETFs are compared.
XTF.com for writ- Clearly, there is no contest that growth performance has been exceptional.

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Category VOT JKH NUMG IWP FNY XMMO 340,000 shares, but inexplicably
Efficiency Score - FactSet 96 94 91 96 83 91 has the worst net asset flows at a
negative $57 million for the past
Tradability Score - FactSet 98 91 84 98 94 95
year, the only ETF in the group
Fit Score - FactSet 85 86 86 87 71 70
with a negative number. Its one-
AUM ($MM) $8,884 $1,220 $206 $13,872 $436 $755 year and three-year performance
Expense Ratio 0.07% 0.30% 0.40% 0.24% 0.70% 0.34% of 26.4% and 16.7% place it third
Annual Yield 0.73% 0.51% 0.36% 0.85% 0.66% 0.49% in the group. And a low expense
Avg. Daily Share Volume 135,569 26,892 24,777 339,808 63,014 85,534 ratio of 0.24% places it second
Avg. Number of Holdings 157 161 58 342 225 77 behind VOT.
Inception Date 08/17/2006 06/28/2004 12/13/2016 07/17/2001 04/18/2011 03/03/2005 IWP also has the highest
FactSet scores on efficiency
Performance 1 Year 25.3% 37.3% 33.8% 26.4% 22.6% 20.7%
(96), tradability (98), and fit (87).
Performance 3 Years 15.7% 20.7% 18.8% 16.7% 14.1% 20.9%
These scores are explained on
Net Asset Flows ($MM) - 1 Year $461 $355 $102 $-57 $73 $72 the FactSet website, but briefly,
Net Asset Flows($MM) - 3 Years $980 $623 $112 $573 $231 $482 efficiency focuses on whether
Std. Deviation 30-day annualized 20.0% 19.5% 20.9% 20.5% 22.5% 21.5% the ETF delivers on its promises
FIGURE 5: COMPARISON OF MIDCAP GROWTH ETFS. JKH and XMMO are the preferred ETFs in this category, as without undue risk or cost, trad-
explained in the conclusion of this article. ability means ability to obtain a
fair market price, and fit assesses
ing this column, but they ceased operations in early September how the portfolio measure ups to its stated objective.
2020.
Figure 5 provides comparative data on the critical variables Vanguard Midcap Growth ETF (VOT)
for the six ETFs. Common characteristics of all these ETFs VOT came in second with $8.8 billion AUM with an August
include: open-ended investment company; 100% US equities; 2006 starting date, as well as with its 0.73% annual yield, and
passively managed; offer quarterly dividends; benchmarked to a decent 136,000 daily trading volume. VOT tracks a market-
S&P 500 Midcap, Russell 1000 Midcap Index or custom index; cap-weighted index of midcap growth companies selected by
listed on NYSE Arca (except for FNY listed on Nasdaq and the Center for Research in Security Prices (CRSP). Moreover,
NUMG listed on Cboe BZX US Equities Exchange); and not it came in first with its one- and three-year inflows of $461
part of the top 10 AUM grouping for all midcap ETFs (excep- million and $980 million, respectively. The low 0.07% expense
tion for IWP, which is the fifth largest in total category). ratio is the best of all. VOT also compiled almost identical
Blackrock is the issuer for IWP and JKH while Invesco FactSet scores as IWP, which is a big positive. However, its
Capital handles XMMO. TIAA offers NUMG, First Trust one-year performance of 25.3% was only fourth best, while
is the issuer for FNY. Lastly, Vanguard issued VOT. Each of its three-year performance of 15.7% was next to last.
these ETFs offers a slightly different focus.
iShares Morningstar MidCap Growth (JKH)
iShares Russell Midcap Growth (IWP) JKH is third in AUM at $1.2 billion with a June 2004 birthdate.
Let’s first review IWP, which was the first midcap growth It tracks a market-cap-weighted index of midcap companies
ETF available and the behemoth of the group with a solid selected by Morningstar based on their growth characteristics.
$13.8 billion in AUM gained over 19 years since its July 2001 Its 37% one-year performance places it first in this category,
inception. This ETF is clearly a powerful asset gatherer. IWP as does its three-year 21% annual return. The daily trading
tracks a market-cap-weighted index of growth companies from is low at 27,000 shares and its standard deviation of 19.5% is
a swath of the 800 smallest Russell 1000 companies using in line with its brethren.
two growth factors. JKH joins IWP and VOT as the biggest players in the arena
Moreover, it sports the highest annual yield of the group and account for 69% of the midcap growth assets. VOT and
at 0.85%, coupled with the highest daily trading volume of JKH have captured 81% of the one-year cash flows out of all
six ETFs discussed, while IWP actually went negative for one
year with outflows of $57 million.
All six of these ETFs had their Nuveen ESG Midcap Growth (NUMG)
NUMG has the lowest AUM in the category at $206 mil-
largest sector percentage lion, as it is not a pure midcap growth play. NUMG tracks
positions in information an index composed of midcap US companies with growth
technology. characteristics that meet specific “environmental, social, and
governance” (ESG) criteria (which is a set of standards used
as metrics in the socially conscious investing arena). Its 0.40%
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expense ratio is second highest, while VOT JKH NUMG IWP FNY followed by industrials (12–17%).
XMMO
its 0.36% yield is the lowest along DLR ZM SNAP IDXX ENPH The fourth most invested sector was
GNRC
with its 25,000 daily trading volume, DXCM SQ TWLO DOCU DAR consumer discretionary (10–11%)
MPWR
none of which are very impressive LULU MELI SPLK LULU INSP with FNY at 14.6% and NUMG at
SEDG
numbers. Its limited 58 portfolio VEEV TWLO CPRT VEEV CHWY
5.6% as the two outliers in either
QDEL
DOCU LULU MTD ALGN GNRC SAM
holdings constitute a concentrated SBAC DOCU SNSS CSGP SAM
direction.
ENPH
portfolio compared to the 342 hold- CMG IDXX PAYC CMG FRPT MASIFor XMMO, the top 10 of its 77
ings of IWP and about 160 for VOT TWLO SNAP CBRE ORLY WMS holdings consisted of 29.5% of its
CRL
and JKH. Performance-wise it is in CNC VEEV XYL KLAC TXG portfolio. FNY had the lowest con-
CGNX
third place with the third-highest IDXX WDAY ZBRA TWLO SAIL centration in its top 10 at 8.4% with
MOH
cash inflows. iShares ESG Screened FIGURE 6: TOP 10 HOLDINGS FOR MIDCAP GROWTH ETFS. 225 holdings. NUMG had 27.8% of
S&P Midcap ETF (XJH) is the lat- Shown here are the top 10 symbols in each of the six ETFs
its 59 holdings in its top 10. IWP,
evaluated. In general, the largest sector holding is in information
est midcap launch on September VOT, and JKH had 12.3%, 14.3%,
technology, followed by healthcare, industrials, and then consumer
22, 2020 and will compete directly discretionary. and 18.2% of their portfolios in their
with NUMG. top-10 holdings. Figure 6 provides
the top 10 tickers in each of the six ETFs evaluated. Notice
First Trust Mid Cap Growth AlphaDEX (FNY) that Twilo, Inc. (TWTO) was represented in four portfolios,
FNY entered the category on April 18, 2011 gathering $436 while Lulelemon Athletica Inc. (LULU) and Veeva Systems
million in assets. It tracks a tiered, enhanced, equal-weighted Inc. (VEEV) were purchased in three.
index of midcap growth stocks selected from the Nasdaq US VOT invested about 1.4% in each of its top 10. IWP had
MidCap Growth Index. This index is reconstituted and rebal- about 1.2% in its top 10. JKH had 3% in Zoom Video Com-
anced quarterly. Eligible stocks are ranked on growth factors munications, Inc. (ZM), 2.3% in Square, Inc. (SQ), and about
including three-, six- and 12-month price appreciation, sales- 1.5% in each of the other eight positions. NUMH had 3.4% in
to-price and one-year sales growth, and additionally on value Twilio, Inc. (TWLO); 3% in Splunk, Inc. (SPLK); and 2.6%
factors including book value to price, cash flow to price and in Copart, Inc. (CPRT), Mettier-Toledo International Inc.
return on assets. All stocks are ranked on the sum of ranks (MTD), ANSYS, Inc. (ANSS), and Paycom Software, Inc.
for the growth factors and, separately, all stocks are ranked (PAYC); and 2.3% in Xylem Inc. (XYL) and Zebra Technolo-
on the sum of ranks for the value factors. A stock must have gies Corporation (ZBRA).
data for all growth and/or value factors to receive a rank for FNY had about 0.90% to 0.77% in its top 10 from high
that style. to low. Lastly, XMMO had 4% to 3% in its top four ETFs—
It has the second-lowest FactSet scores and the highest GNRC, MPWR, SEDG, and QDEL—and about 2.45% in the
expense ratio at 0.70%. Annual yield of 0.66% is third highest remaining six holdings.
and its 63,000 daily volume is low, but reasonable. Performance-
wise it came in dead last for three years at 14.1%, and next to Conclusion
last for one year at 22.6%. Its portfolio size of 225 places it Based on a review of the key characteristics of the six midcap
midrange. Its alpha is 5.00 and beta is 1.05. growth ETFs evaluated here, I’ve concluded that for investors,
JKH just edges out XMMO on the basis of higher FactSet
Invesco S&P Midcap Momentum ETF (XMMO) scores, better long-term performance (March 2, 2005 through
XMMO, born in March 2005, was included from the plain
vanilla category because of its top three-year performance Continued on page 39
record of 20.9%, beating all the others in the growth category.
Unfortunately, its more recent one-year performance of 20.7%
was the weakest of the six. Its FactSet efficiency and tradability
scores are strong at 91 and 95%, respectively, but its fit score The “efficiency” [rating]
was the lowest at 70. XMMO tracks an index of S&P 400 focuses on whether the ETF
midcap stocks based on momentum and weighted by market
cap and momentum.
delivers on its promises
Its expense ratio of 0.34% and 85,000 trading volume without undue risk or cost,
places it midrange while its annual yield of 0.49% places it “tradability” means ability
in the bottom quartile. The portfolio is fairly concentrated to obtain a fair market price,
with 77 issues.
and “fit” assesses how the
Sector breakdowns and holdings portfolio measures up to its
All six of these ETFs had their largest sector percentage posi- stated objective.
tions in information technology (most in the 25% area) with
JKH the outlier at 42%, followed by healthcare (20–24%), and
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Candlesticks And Cryptos
A Quick Look At Approaching

Cryptocurrencies
Are candlestick patterns and basic technical analysis prin- always, when bitcoin rises, all the other coins do the same.
ciples useful for trading cryptos? We take a look. When bitcoin falls, the other coins also tend to fall.
The point of this article will not be to discuss specific tools
by Azeez Mustapha or strategies. Rather, it will seek only to introduce you to some
T
of the structures relating to cryptocurrencies—a still new and
wo of the most important success factors for a developing field of investing.
trader are their ability to assess and recognize
risks, and their ability to evaluate and control Buy low, sell high
their impulses. Both require separate types It sounds simple, but you will be surprised. Note that “buying
of skills, but there are some matches. at a low price” doesn’t mean buying really bad coins. You
In the trading process, you will encounter should only buy low prices in coins that have a proven history
many opportunities to take risks. Of course, of good results but that were perhaps hit by a falling market.
most of them are not worth considering, but from time to That way, you can know that not only is your coin falling but
time you will find in the market something that you want to most likely, all the coins and tokens are falling. When the
WIT OLSZEWSKI/SHUTTERSTOCK
become a part of. market recovers, your coin will also recover (most likely).
If you are new to the world of cryptography, it is best to Selling high is also a struggle. Most people tend to want to
start your portfolio with the purchase of bitcoin (BTC). This wait “just a little longer” to see how far the top goes. Bad idea.
is a common way to get your feet wet, as well as a great way If you made a satisfactory return on your investment, pull it
to understand how cryptocurrencies are moving. Almost out and convert it into fiat. Do not be too greedy.
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CRYPTOCURRENCIES
Reading charts
Before we get into the technical
analysis of it, I would just like to first
make sure you understand how to read
basic candlestick charts. So this will
be just a brief reminder rather than
a full review.
Candlestick charts are made up of
multiple bands of green or red (or any
two different colors, but using green
and red is usually the default setting).
Green indicates that the price of a coin
has risen since the last period the bar
represents. The red bars represent the
TRADINGVIEW
price which has declined since the
last period.
In trading terms, the main body FIGURE 1: CUP WITH HANDLE. In this pattern, the candles drop significantly for a long time, only to start a quick
of the candle is called the real body. climb up immediately after the second ascent. This means a possible continued increase in value.
On green candles, the base of the real
body is sometimes called the open-
ing price (the price at the beginning
of the reference for this period) and
the top of the real body is called the
closing price (price at the end of the
period). For red candles, this process
is the opposite: The upper part is the
opening price, and the lower part is
the closing price. Any lines emerging
from real bodies are called shadows
or wicks. The upper part of the wick
represents the highest price that the
coin was bought during this period,
and the lower part of the real body rep-
resents the lowest price that the coin
FIGURE 2: MEASURED UPWARD MOVEMENT. Candles begin to rise, stop to rest (where they move sideways),
was bought during this period. Wicks and then continue to rise upward. The fact that the asset has been moving sideways for a considerable time makes
are rarely taken seriously, as they are it more optimistic than the average upward pattern.
often considered anomalies.
that interest you.
Technical analysis Market capitalization is the price of asset X, the number
There are many technical analysis tools to help you become a of existing assets. The greater the market capitalization, the
successful trader on your journey. Technical analysis allows more effort will be required for the asset to grow in value.
people to make informed forecasts regarding the future market This is a more important factor to check than just the price
based on its history. Many traders and investors argue that it is of a coin. For example, newcomers could think that Ripple
technical analysis that separates traders from standard players has many opportunities for growth as they looked at its price
because technical analysis allows people to make knowledge- on July 13, 2018 of just $0.40, but the market capitalization
based decisions rather than impulse-based decisions. is $17,291,808,853, which is huge. This means that price
Several different types of technical analysis can be used fluctuations in Ripple are slower than for coins and tokens
to facilitate your transactions, and although more advanced with lower market capitalization.
methods are not needed, some basic information should not Thanks to this characteristic, traders love to find coins with
be ignored. low market capitalization. A market cap shows the rarity of
People will think that technical analysis is about observing coins. This is why some developers prefer to regularly “burn”
patterns in charts. And that’s certainly a big part of it, since their coins to increase the price.
technical analysts were, after all, the original chartists. But
the term technical analysis also covers a lot more. One of the Bullish chart patterns
most basic things you can do that involves technical analysis It is well known that applying technical analysis patterns to
is to look at the market capitalization of the coins and tokens cryptocurrencies is extremely difficult and temperamental, but
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Bearish chart patterns
The following patterns, as a rule,
are the exact opposite of the bullish
patterns:
Inverted cup with handle: Candles

rise significantly, then begin to fall,
and in the end there’s an even steeper
fall.
Measured downward movement:

Candles begin to fall, pause, and push
sideways, then continue to fall. Trad-
ers see this as a terrible sign since a
pause and a side push make the fall
FIGURE 3: THREE POINTS OF RISING. Candles rise, then lower, rise again, lower, and finally rise for the last time
seem calculated and thorough (and
(this time higher than the previous times). During each lift, candles move higher than the previous lift. not accidental).
this does not mean that we should completely ignore patterns. Three downward points: In this pattern, candles rise, fall,
Although I found that these types of patterns are not execut- rise again, lower again, perform one last rise, and then fall
able, this does not mean that they are unreliable. further than previously.
Here are some bullish charts you will encounter. With most
exchanges you will be able to notice these patterns quickly, Finally
given that their interface is simple and intuitive: If you’ve come this far with building
your theoretical knowledge of the
Cup with handle: This is the place where the candles on the markets, congratulate yourself. It’s
chart drop significantly for a long time, only to start a quick not easy, and it’s even more difficult to
climb up, immediately after the second ascent. This means a follow and apply to live trading than it
possible continued increase in value. is in textbooks.
My goal for this article has been to
Measured upward movement: Candles begin to rise, stop to simply point out a little of what’s in-
rest (where they move sideways), and then continue to rise. The volved and to offer a few things you can apply to your trading in
fact that the asset has been moving sideways for a consider- cryptocurrencies. Also, developing the right thought processes
able time makes it more optimistic than the average upward that go into trading is important to anyone’s dream of making
pattern. If an asset grows without interruption, it could be a a career out of cryptocurrency trading. Trading can be a dif-
sign of market manipulation or crowds. The fact that investors ficult process, but it becomes easier the more you do it.
stopped for a moment and continued to invest is a sign of a
high-quality coin or token. Azeez Mustapha is an analyst at Instaforex Companies Group
and a blogger at Advfn.com, and as well as a freelance author
Three points of rising: This is when candles rise, then lower, for trading magazines. He is a trading signals provider at some
rise again, lower, and finally rise for the last time (this time websites. He can be reached via email at azeez. mustapha@
higher than the previous times). During each lift, candles move analytics.instaforex.com.
higher than the previous lift. Even though each accompanying
fall is usually regarded as bad behavior, subsequent ascents Further reading
continue to rise higher. Mustapha, Azeez [2020]. “A Nondirectional Trading Strategy
For Cryptocurrencies, Part 1,” Technical Analysis of Stocks
& Commodities, Volume 38: February.
[2020]. “A Nondirectional Trading Strategy For Cryp-
tocurrencies, Part 2,” Technical Analysis of Stocks &
One of the most basic things you Commodities, Volume 38: April.
can do is to look at the market [2019]. “Spotting Imbalances In Novel Markets,”
Technical Analysis of Stocks & Commodities, Volume
capitalization of the coins and 37: September.
tokens that interest you.

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INTERVIEW
Portfolio Manager, Chartered Market Technician
Technical And Market Analysis

With Kyle Crystal
Kyle Crystal, CMT, CFTe, is a portfolio manager and technical/quantitative market
strategist with over 15 years of experience formulating and implementing invest-
ment policy in various styles including long-short, global macro and long-only
for single managed accounts as well as fund structures.
A contributor to the CMT Association 2019 curricula, he has expertise in defin-
ing price objectives, support/resistance, and cycles. His skillset includes multiple
timeframe analysis, market geometry, Elliott wave theory, momentum oscillators,
Gann analysis, cycles, and candlesticks.
His firm, Lakeshore Technical Analysis, LLC, provides technical and quantitative
forecasting to institutional clients including portfolio managers, risk managers
and wealth managers. Technical education is also offered to traders and analysts.
Crystal is a Bloomberg research contributor and holds Series 65 and Series 3
licenses. More information on these services can be found at his website, www.
lakeshoretechnicalanalysis.com.
In addition to offering forecasting services, his related companies, Crystal
Capital Advisors, LLC and Eastborough Capital, LLC, offer portfolio and money
management services for both equity and futures markets.
Stocks & Commodities Contributing Writer Karl Montevirgen interviewed Kyle
Crystal in October 2020 to discuss his approach to analyzing the markets.
After the 2009 bear
market in equities,
Kyle, tell us a bit about ket’s Compass, who described himself I decided I needed a
your background. When as an “Elliottician” and he encouraged skillset to not only avoid
did you first encounter the me to go through the Chartered Market
markets, and what set you Technician (CMT) program offered by disaster but to see it
on your current path as a the CMT Association (formerly known coming and profit from it.
technical analyst? as the Market Technicians Associa-
I grew up around markets. My dad tion). It was a great recommendation. I
was a successful portfolio manager and first developed a base skillset and then Capital Advisors, LLC, a Registered
I remember him bringing copies of his I read day and night for about seven Investment Advisory (RIA) firm. So,
Daily Graphs chartbooks on our annual years (much to my wife’s chagrin!), and Lakeshore was a natural extension of the
family vacation as a kid. I was lucky I studied with some brilliant people all skillset I developed managing money. My
because I came right out of grad school while applying theory to the reality of first client was a portfolio manager at a
and was able to work alongside him and managing capital. mutual fund who asked if I had a side
learn the business. I am still lucky enough service for analysis of commodity mar-
to be working with him today. And now you operate a firm whose kets. Since then, I have grown through
After going through the 2009 bear services are primarily focused on referral and cold calls, believe it or not.
market in equities I decided that I needed technical analysis. Not an easy task, I love introducing myself to firms and
a skillset to make sure that I could not considering that most research firms seeing where the conversation leads. I
only avoid another disaster, but see it are fundamentally oriented. And your also have a good sense of humor and
coming and profit from it. Initially, I firm specializes in Elliott wave analy- that is required for cold calls!
started down the CFA (Chartered Fi- sis, something that most mainstream
nancial Analyst) path but I decided the financial institutions would find unfa- I’m curious—what is it like advising
material was too removed from the day- miliar. How did you do it? various types of institutional invest-
to-day actions of the market. I called on It really came about after years of ment firms, many of whom are probably
someone who ended up becoming a real managing capital. Lakeshore Technical fundamentally based?
friend, Tim Brackett, now of The Mar- Analysis, LLC is a trade name of Crystal Out of all the businesses I am involved
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in, advising Lakeshore clients feels the I enjoyed it but found it
least like work! I truly enjoy it. I think the a little complicated when
key is 100% transparency and honesty. it came to application. I studied with some brilliant
I work very early in the relationship to Given the complexities people, all while applying
make sure clients understand the basic and potential variations
technical concepts that will be utilized involved in the theory,
theory to the reality of
in real-time. From that point forward, might this form of analy- managing capital.
everything I bring into the analysis builds sis present be a bit risky
on the basics. As they see consistency in the hands of less expe-
and watch movements unfold, they gain rienced technicians? think that’s what your question eludes
trust in the methods. When I first learned about Elliott wave, to. When you get into those situations
I’m bringing noncorrelated informa- I thought it was amazing and interest- where you are seeing more than two
tion to the table that cannot be generated ing. And then about six months later, I possible scenarios, it’s best to put it all
from fundamental analysis. For instance, decided it was worthless. I probably went aside for the time being. Again, it is a
specific price targets, support/resistance, back and forth on that several times over subjective tool open to interpretation, so
specific dates, and real-time action a couple of years. I finally came around some situations will lack clarity.
signals. This information is then used to finding it useful. But I think when
as a complement as well as a checks- trying to implement this approach, you So you find that Elliott wave analysis
and-balance system against their own really have to work with somebody who has its usefulness but it shouldn’t be
fundamentally based view. understands it. It’s hard to implement it treated as the holy grail, which less-
just by reading about it. experienced traders might uncritically
How do you view the relationship assume.
between fundamental and technical I can see how working with someone Right. Some people will think, “If I
strategies? would be helpful. Elliott wave analysis can just go back and understand market
Fundamental strategies tend to be dis- is as subjective as an art but it’s as movements over the last 10 years, then I
cretionary or have a discretionary com- complex as a science, which makes it should be able to predict market move-
ponent. Technical strategies may or may difficult to work with. ment going forward.” But I think it’s
not have discretionary components. Yes, that’s why it helps to sit alongside dangerous to think that. If you start trying
In my opinion, fundamentals provide someone and watch how they develop to predict large-degree market move-
the answer to the question why. Funda- their count. It is through this kind of ments, what this does to your thinking
mentals are responsible for the long-term osmosis that you can start to really is it glues your brain into expectations
secular movement within markets and understand how Elliott wave works. So that may not happen.
therefore fundamental analysis excels in my opinion, it’s a valid approach and The reality is, there is no holy grail.
at helping one see through some of the can be very useful. But there’s no doubt You are going to make mistakes, and
noise found in the near-term market that it’s the most subjective tool in the no tool is perfect. When it comes to ap-
movements. toolbox. plying Elliott wave analysis, I find it’s
Unfortunately, fundamental analysis Because of that subjectiveness, it’s better not to start from the big picture,
offers little to no market timing or the first tool I will put aside if there is as is the general custom when analyz-
risk-management methods. Therefore, any ambiguity within price structure. ing the markets, but rather, start small
fundamentally based strategies can However, here are two underlying ten- and work up. That way, the distance to
improve their timing and risk manage- dencies to understand about the market whatever negates your count is as small
ment through the addition of a technical and why I think Elliott wave analysis as possible. This helps to minimize any
overlay to help answer the question of can be useful: Basically, it’s helpful misinterpretation.
when or even which (as in which market, to understand that market chop is es- So, to use Elliott wave effectively,
which stock, which commodity market, sentially corrective, and that aggressive I’d say that first, you have to go from
etc.). movement is essentially impulsive. And the small picture to the big picture.
the more you get into it and study it, the And second, since it’s a subjective tool,
Let’s talk about Elliott wave. Years ago more you can pick up on all those wave you must use confirming analyses. You
I read the well-known Frost & Prechter variations. Basically, you will know what should be thinking, how can I confirm
1978 book on Elliott wave analysis. your preferred wave count is, and the my counts? What tools would be
Yes, it’s considered the “bible” of second-highest probability will be the complementary to this analysis? There
Elliott wave theory, serving as both an alternative wave count. are some technicals that can help to
introduction to the approach as well as But there will be periods in the market confirm whether we’re in a third wave, a
a documentation of how the technique where you will see conflicting scenarios, fifth wave, and so on. Using confirming
is applied. and you may think to yourself, well, it tools can raise the probabilities of getting
could be this, or it could be that. And I a good wave count.
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That’s interesting because people my thoughts, my read on the market, piece of the puzzle. The reason for that
would typically approach this theory and where technicals suggest we are is because they can invert, as you’ve
scaling the general down to the par- heading. I do that through conference described. So in general, it’s the least
ticular. But what you’re saying is to calls and screen sharing to graphically important piece of information that I tend
go the other way around, to go from demonstrate and annotate my interpreta- to care about. Generally, cycles produce
the particular to the general. And also, tion of the market. That way, I can walk a window of time where something may
you’re saying that if you come across the client through what I am seeing and happen, meaning a change of trend. But
too many variations that may conflict, share my thoughts. whenever you create or identify a win-
you have to know when to toss out the By the way, it’s easy to go off into the dow for a change in trend, the market
count and put the analysis aside. weeds with wave counting. So I created doesn’t have to turn there. So you need
That’s right, and then you have to lean a simple Elliott wave course for people other non-correlated tools to add to
on your other tools. who want to learn the technique. I offer your analysis to help indicate when the
it through my firm, Lakeshore Techni- market may turn.
I’m thinking about the chaotic events cal Analysis. In the course I provide So cycles can’t be used as an action
of this year and the markets. A lot has examples using real market charts. I signal. They are really just an additional
been going on that affects the mar- provide the basic guidelines, I provide layer of information to be aware of. There
kets, from quantitative easing (QE), the logic, I translate the line drawings are different types of cycles, but they all
to trade tensions with China, to the to real market charts (Figure 1), and function essentially the same way.
pandemic. I can imagine someone I provide a way to quiz yourself with
trying to plot a wave count amid the example charts (Figures 2 and 3). And an example of a natural cycle such
uncertainty. How do you work with so as seasonality would be, say, planting
many unprecedented events? And does Let’s talk about cycles. If you put a and harvest seasons?
that tend to throw off the basic Elliott bunch of cycles together, I can imagine Yes, seasonality is the most common
wave structure? that a few of them might converge, or natural cycle.
It’s a great question but compliance not. They can agree or disagree. How Something to be aware of is that sea-
restrictions prevent me from discussing often do you come across conditions sonality charts are essentially an overlay
current markets with any specificity and wherein cycles don’t really agree or of many years, including the outliers. If
advising what I think. However, a lot of are not compatible? And what do you there’s an extreme outlier in a given year,
what I do at Lakeshore is to consult with do when that happens? it’s going to disproportionately influence
people about current markets. I share To me, cycles are the least important the seasonality chart. So you have to
OPTUMA
FIGURE 1: EXAMPLE OF THREE CORRECTIVE STRUCTURES. This chart displays the three simple corrective structures found within Elliott wave theory: the zigzag,
flat, and triangle. The bar charts below each line chart above offer some real-life examples of the patterns.

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break it down by different intervals of Yes, particularly for natu-
time, by plotting one year over another ral cycles. Each type of cycle
year, and then again over another year. has its own quirks that you The higher timeframe is
Then we’ll look for correlation between have to work with. essentially the trend. The
the different years to identify which
pieces of seasonality actually repeat. You Can you explain the differ- movements and the smaller
can think you see a seasonal pattern if ent quantitative measures timeframe are the push and
you look at a chart over a single period you employ in your ap- the pull within the trend.
of time. But you have to compare year proach (and services)?
over year. If there’s variation at a point I use quantitative mea-
during the year that repeats over many sures primarily within cy-
years, it’s meaningful. clical analysis. I work to identify three full technical system for trading fixed
So there are pieces of seasonality that independent types of cycles on each cycles. Sometimes people will refer
are correlated and have high probability, market: fixed cycles (Hurst analysis), to fixed cycles as Hurst cycles. While
and there are pieces of seasonality that natural cycles (seasonality, etc.) and exceedingly rare, his correspondence
are noncorrelated and have low prob- periodicity (sequencing). Fixed cycles course is very cool and required reading
ability. and natural cycles can and should be for serious market students.
verified through quantitative analysis
So if I understand you, you’re saying (spectrograms, composite diagrams, Can you talk about multi-timeframe
that you have to overlay many cycles correlation, etc.). I write about some of analysis, which is one of the mainstays
to see what’s really correlated versus these methods and tools in the CMT level of your approach?
what’s not? To discern between more I and II curriculum that I authored. As a broad statement, I use multiple
reliable patterns versus randomness? timeframe analysis to provide clients
Is there any software available to as- with actionable information that is spe-
sist traders with either Elliott wave cific to the timeframe of their business.
analysis or cycle analysis? Is it possible For instance, if a client is interested in
for software to help with these types of buying soybean meal every two weeks to
analyses? And if so, do you use such feed their hogs, they need to focus on the
software yourself, or do you perform daily timeframe because buy/sell signals
your analysis just by observation and tend to last 1 to 2 weeks. However, a client
your own study? who is interested in buying soybean meal
Yes. I use Optuma software. It for- every three months will be interested
merly was called Market Analyst, but in technical signals originating from
now it’s called Optuma. They have a the weekly timeframe, as these signals
wonderful product and graphics. tend to last 1.5 to 6 months. So the client
The graphic display is very impor- dictates the timeframe.
tant to me so that I can screen-share I generate the analysis from three
FIGURE 2: THE EXPANDED FLAT. This chart illustrates
an expanded flat. This is a common variation of the
with clients to show them more clearly independent noncorrelated perspectives:
flat pattern where the “B wave” and “C wave” expand what I am seeing. You can customize structure, momentum, and cycles. These
to new extremes before reversing. the charts to your liking. It also uses methods of analysis are always employed
an opensource coding language that in order of priority as mentioned above.
allows you to go in and work with data I am also a fan of using Commitment
in a custom way. The software can also Of Traders (COT) data when available.
label Elliott waves, although in order to While I use the exact same approach
interpret these labels, you still need an on every market, I do tweak the tools
understanding of Elliott wave theory. to match the volatility characteristics
Cycle-wise, it offers a spectrogram, of the market.
and it also has some Hurst tools. These I think multiple timeframe analysis is
functions help you to look for cycles and the most important piece of the puzzle.
seasonality that may be taking place in You need multiple timeframes in order
the market. to understand what’s happening in the
markets, because the reality is that price
You mentioned Hurst cycles. is a fractal. Every movement is a piece
FIGURE 3: THE CONTRACTING TRIANGLE. This
Yes, JM Hurst was the first to docu- of a trend that’s one timeframe higher.
illustrates the most common variation of the triangle ment fixed cycles with the aid of a com- For Hurst cycles, for example, if you’re
pattern: a contracting triangle. puterized spectrogram and he created a dealing with a 20-day-cycle, it’s heavily
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to keep it simple, although of this like Elliott wave—it’s fractal.
it could be more). It’s the Price structure is fractal. So we need
It’s helpful to understand push and the pull that tells tools that address fractals. Elliott wave
that market chop is us what to do with the near- analysis does that. Multiple timeframe
term movements. Do we analysis does that. Pitchforks do that.
essentially corrective, and want to ignore them? Or do Elliott wave was designed for equity
aggressive movement is we want to take advantage markets. After all, the developer of Elliott
essentially impulsive. of the situation and do the wave theory, R.N. Elliott, was sitting in
opposite of what the near a hospital bed studying stock charts, and
term is doing? what he discovered was essentially the
This is why I find multiple fractal nature of it. He started to docu-
affected by the 40-day-cycle. Meaning timeframe analysis so useful. ment the fractals he saw in the stock
that the higher timeframe is essentially charts, which became the waves.
the trend. And the movements and the You wrote part of the CMT (Chartered The pitchfork was designed for com-
smaller timeframe are the push and the Market Technicians) curricula? modity markets, in particular, the grain
pull within the trend. Yes, that’s right. markets. It has a fractal concept to it.
For an example, and keeping it simple, Let’s say the pitchfork is bullish—price
let’s consider a weekly chart and a daily Do you have anything available for is moving up within the pitchfork—
chart. When it comes to commodities, readers to read of yours who are not and then all of a sudden it breaks the
I generally refer to the weekly time- necessarily taking the CMT course? lower parallel and now price is out of
frame as the trend. That is what most If you truly want to learn then I would the pitchfork. That’s the same concept
people feel is the trend. When you get encourage you to reach out and drop of degree. So it essentially means that
a signal in a weekly timeframe, it tends me an email. I work with people of all upward movement is completed and we
to last between one-and-a-half months skill levels. could be in a new structure. So it could
to six months. Meanwhile, the daily As for published material, I’ve written mean the impulse up is done and we’re
timeframe is like the near-term push the cycle curriculum for Level I and II now in a correction.
and pull of the next one or two weeks. technicians within the CMT program. So pitchforks are a great noncor-
So you really need two timeframes There’s a total of four chapters that dis- related complementary tool to Elliott
to understand the bigger picture. As cuss cycles. The first two chapters discuss wave analysis.
an example, let’s say we’re in a bull the basics of cycle theory and principles
trend, meaning the weekly timeframe as per the work of the late J.M. Hurst as Anything else you’d like to mention?
is bullish, and the market is creating well as seasonality and detrending. The We know we are in the Wild West right
higher highs and higher lows. Let’s say second two chapters focus on tools used now from a macroeconomic standpoint.
it’s midway up in its range, it’s healthy, to phase cycles as well as application Technical and quantitative analysis
and there are no issues. And then we through case studies. is likely to become more and more
get a sell signal on the daily timeframe. As for other available writings, you important to “getting it right” as time
What does that mean? It suggests “buy can read two articles that I co-wrote on progresses. I would argue the current
the dip.” It suggests that in the near the Andrews pitchfork in issues 84 and environment requires technical input
term, the market is likely to go down, 85 (March 2018 and September 2018) and, from what I see, most firms agree
possibly for one or two weeks. But in of The Journal of The Society of Tech- with this view.
the higher timeframe, the trend is up. So nical Analysis, which is the publication I am involved in a lot of businesses:
in a case like this, we might be looking from The Society of Technical Analysis Lakeshore Technical Analysis (market
to buy the dip. (STA), the UK’s professional body for forecasting/risk management), Crystal
Now think about a different scenario technical analysts. Capital Advisors (active equity man-
where the weekly timeframe has been Pitchforks are an amazing tool. And agement), Round Rock Advisors (com-
going up. But now, say it has a sell sig- most people don’t really focus on them, prehensive financial planning/wealth
nal. Say your daily timeframe also has so I think they’re underappreciated. management), and Eastborough Capital
a sell signal. Well, that situation does There is no better tool for the diagonal (systematic commodity pool). All of
not suggest “buy the dip.” It suggests we axis. I would suggest that people read them, while different, have a common
may have a major high and so we need those articles and really try to think theme: They use technicals as an input
to react accordingly. about what the pitchfork formations are for decision-making.
So it’s all about the context. The near- actually showing. Working with markets is one of the
term signals are all about the context of most challenging jobs on earth, but if
the trend, what is happening within the Isn’t there a lot more complexity to you decide you want to drive the bus, I
trend, and the push and pull of at least pitchforks than it seems at first? would encourage you to study technicals
two timeframes (two timeframes in order It does involve degrees. You can think and specifically to go through the CMT
https://libta.org
program offered by the CMT Associa- analyze the markets. Good
tion. It offers good preparation. to hear about them.
And I would just encourage anybody I’m bringing noncorrelated
who wants to learn more about some of Karl Montevirgen is a con-
these technical analysis tools, or who tent writer specializing in
information to the table that
feels they are overexposed to the vola- financial markets as well cannot be generated from
tility in the markets and they need help as the arts. His website fundamental analysis.
with this, to contact me. is www.kontenthammer.
Finally, and perhaps most important, com.
I’d like to mention a quick word of thanks
here to my wife for her years of support Further reading https://www.technicalanalysts.com.
and encouragement. What I do is not easy Crystal, Kyle, and Brackett, Timothy Hurst, J.M. [1970]. The Profit Magic of
and it’s quite time-consuming. She has a [2018]. “A Brief History Of The De- Stock Transaction Timing.
level of patience that deserves acknowl- velopment Of Median Line Analysis,” Prechter, Robert, and A.J. Frost [1978].
edgement and gratitude. Thanks, Meg! The Journal Of The Society Of Tech- Elliott Wave Principle, Elliott Wave
nical Analysts, March 2018 issue 84, International.
How can someone contact you? The Society of Technical Analysts, ‡Optuma
Anyone can make an inquiry through https://www.technicalanalysts.com. ‡See Editorial Resource Index
my website at http://www.lakeshoretech- [2018]. “Further Analytical Meth-
nicalanalysis.com. ods Using Median Line Analysis,”
The Journal Of The Society Of Tech-
Thanks for speaking with us and for nical Analysts, September 2018 issue
sharing examples of what you use to 85, The Society of Technical Analysts,
METGHALCHI & BAIG/GOLD

Continued from page 19
We will apply the gold
GMS for the Euro Stoxx 50 has higher return and lower risk momentum strategy semi-
than investing in the Euro Stoxx 50. annually to several stock
The same conclusion can be made for all the other indexes market indexes in industrialized
tested except the MSCI Emerging Market Index. For example,
looking at the DJ World Index, with an average annual return
countries, to some well-known
of 7.09% in US currency, a trader could follow the semi-annual world indexes, and to the S&P
GMS and increase the return to 10.43% and at the same time 500 index.
lowering her risk from 14.95% to 10.22%. You can see from
Figure 2 that the semi-annual GMS works for all major world
indexes tested except the EM.
Massoud Metghalchi, PhD, is a professor of fi nance at the
S&P 500 index results University of Houston-Victoria. He may be reached at Met-
Looking at the S&P 500 index test results in Figure 2, we see ghalchim@uhv.edu.
a very significant improvement in the risk-return trade-off. Ahsan Baig is a student at University of Houston-Victoria
The semi-annual GMS applied to the S&P 500 index would pursuing an MBA degree.
enhance the S&P 500 return from 8.72% average annual return
to 14.47 % average annual return, while the risk is reduced Further reading
from 13.95% to 10.72%. Tang, Robert [2019]. “A Gold Momentum Strategy,” Techni-
cal Analysis of StockS & commoditieS, Volume 37:
SuMMarY December.
In summary, we applied the semi-annual gold momentum Metghalchi, Massoud [2020]. “Variations On The Gold
strategy to various individual industrialized countries and a Momentum Strategy,” Technical Analysis of StockS &
few well-known world indexes. Our results strongly support commoditieS, Volume 38: May.
applying the semi-annual GMS for all the individual industri-
alized countries tested and all the world indexes tested except
the MSCI Emerging Market Index.
https://libta.org
TARGET RICH TRADES as well as for long and short re-entry a diamond shape and all the underlying
MetaStock Add-on trades. Whenever a buy or sell signal conditions for a trade have been met, a
4548 Atherton Drive, Ste 200 triggers, an alert pops up on the screen text label, a directional arrow, and an ini-
Salt Lake City, UT 84123 that labels the type and direction of the tial stop-loss sign appear on the chart.
Phone: 800 882-3040 signal. But more than merely signaling Trade re-entries also display the buy
Web: www.MetaStock.com/ those trades, the algorithm automati- or sell label and arrow but occur after a
saleschat cally recognizes and labels support and failed entry, one that initially had been
Requirements: MetaStock version resistance levels as well as the buy and stopped out, or after a failed pullback.
13 or higher, Windows XP or higher sell zones. The support and resistance diamonds
Product: MetaStock add-on for a trad- provide the initial trading targets but
ing system by Anne-Marie Baiynd Program components also could form part of an additional
Price: $499 one-time fee with 30- The program opens with a price and trading strategy in which the diamonds
day money-back guarantee volume chart template that displays a themselves serve as both entries and
special moving average to represent the exits. For example, traders looking for
by Barbara Star, PhD overall general trend. The chart springs long entries in an uptrending market
to life when an expert advisor is added. could use the green diamonds as entry
Target Rich Trades incorporates a trad- It populates the chart with signals and or re-entry signals and red diamonds as
ing system used by Anne-Marie Baiynd, text labels, along with colored price bars places to take profit.
the originator and CEO of The Trading that show buying and selling strength.
Book.com. This MetaStock add-on com- Commentaries
bines her use of trend, support/resistance, A commentary feature located within the
and momentum within bullish and bear- Target Rich Trades expert advisor provides the trader with
ish price cycles to produce real-time buy incorporates a trading information about the current trend, the
and sell signals in all timeframes. system used by Anne- price level of both the last support and
A “target-rich trade” is an area on the the last resistance areas, and whether a
chart that identifies the beginning of a
Marie Baiynd. new or open trade currently exits.
potential price move that leads to new Once a trade is triggered, the com-
trading targets. Sometimes these are A color ribbon under the chart identi- mentary conveys information about how
areas where price might reverse and fies the current shorter-term trend (see to proceed, with suggestions for exits or
sometimes they are areas where price Figure 1). profit-taking. Trade-management sug-
continuation moves could be expected. Diamond shapes mark support and gestions are also given for open trades,
The Target Rich Trades add-on issues resistance levels. When the algorithm those that are currently in progress. An
signals for long and short reversal trades detects a buy or sell zone that follows initial stop-loss price, which adjusts
FIGURE 1: TARGET RICH TRADES FOR EASTMAN CHEMICAL. As seen on the daily chart of Eastman Chemical, Target Rich Trades automatically displays both
longer-term and current price trends, support and resistance levels, and buy and sell zones.

https://libta.org
automatically as the trade progresses, many bars have passed since posting the stray from the path of sound technical
is added to the commentary. last support or resistance diamond and chart analysis and rely on guesswork
also the price when that happened. or media attention for selecting and
Trade preparation The backtester can test one symbol entering a trade. Target Rich Trades
Even though a buy or sell signal flashes, or multiple symbols. It can display a replaces guesswork with the key techni-
traders are advised to avoid blindly en- bar graph to show winning and losing cal analysis components, scanning, and
tering a trade. Trade preparation is so trades as well as a report summarizing trading signals necessary for a solid,
important to Baiynd that she outlines performance activity for each symbol real-time trading method that works in
a procedure to follow prior to entering all timeframes for both beginning and
a trade. Price slope, relation to moving experienced traders.
averages, and support/resistance location A “target-rich trade”
are among the subjects she discusses to is an area on the chart Barbara Star, PhD, is a Contributing
assess the probability of a successful Writer to Technical Analysis of Stocks
trade outcome.
that identifies the & Commodities magazine. She can be
beginning of a potential reached at 818 224-4070 or by email at
Scanning and backtesting price move that leads to star4070@aol.com.
The program includes scans for long new trading targets.
entry signals, short entry signals, and Resources
recent inflections. The scan lists those Gibby, Jeff [2018]. “Anne-Marie’s
symbols that have signaled either a buy which includes profit or loss, reward Target Rich Trades for MetaStock,”
or re-entry buy and a sell or re-entry to risk ratio, and the dates when orders video, https://www.youtube.com/
sell, as well as price levels where stops, were considered, placed or canceled. It watch?v=vvXs9cumuWc
confirmations, and closes occur. can even plot an equity line on the price
The recent inflection scan is unique chart of any symbol tested. ‡MetaStock ‡TheTradingBook.com
because its function is not to filter for buy ‡See Editorial Resource Index
or sell signals. Instead, it includes every In tune with the basics
symbol on the chosen list and tells how Too often, traders are tempted to
MASONSON/WHY TRADE ETFS?

For investors, JKH just edges
November 4, 2020) with a total return of 445% vs. 408%, 2020 out XMMO.
current-year performance (through November 4) of 31% vs.
17%, 1.6 times the AUM, lower standard deviation, higher
cash inflows, and a more diversified portfolio with 161 posi-
tions. XMMO had a higher daily trading volume of 85,000 Are you interested in learning more about using exchange
vs. 27,000 and more concentrated holdings with 77 positions, traded funds (ETFs) in your trading? Leslie N. Masonson,
though neither is a very significant factor. an active ETF trader, is president of Cash Management
Although Vanguard’s VOT had the lowest expense ratio, Resources, a financial consulting firm that focuses on ETF
highest cash inflows, significantly more AUM, and five times relative strength and sector strategies. He is the author of
VOT’s daily trading volume, it severely lagged on long-term Buy—DON’T Hold: Investing with ETFs Using Relative
performance from August 2, 2006 to November 4, 2020 of Strength To Increase Returns With Less Risk, and All About
309% vs. 378% for VOT, and short-term 2020 YTD perfor- Market Timing, as well as Day Trading on the Edge. His
mance of 20% vs. 31% for JKH. website is buydonthold.com, where he writes a monthly blog.
iShares Russell Midcap Growth (IWP), the AUM leader of To submit topics for future columns, reach him at lesmason-
the group, with a number of leading factors such as highest son@yahoo.com.
annual yield and largest number of portfolio positions, also
had negative cash inflows of $57 million compared to VOT’s resources
massive inflows of $461 million. Moreover, on a long-term www.blackrock.com • vanguard.com • ftportfolios.com
basis from July 2, 2004 through November 4, 2020, IWP gained • www.invesco.com • www.nuveen.com
457% compared to 526% for JKH, and since the beginning
of 2020 was underperforming JKH by 10 percentage points.
NUMG also underperformed JKH since December 15, 2016 by
17 percentage points and in 2020 by 1.5 percentage points.
https://libta.org
Explore Your Options
GOT A QUESTION ABOUT OPTIONS?
Jay Kaeppel has over three decades of experience in the options markets. He
was a head trader for a CTA firm, an options trading software developer, and is
a portfolio manager for an investment management firm. He also spent several
years writing a weekly column titled “Kaeppel’s Corner” and now publishes a
blog, “Jay On The Markets” (http://jayonthemarkets.com). He is the author of
several books, including The Four Biggest Mistakes In Option Trading; The Option
Trader’s Guide To Probability, Volatility, And Timing; and Seasonal Stock Market
Trends. Send your questions or topic suggestions to Jay Kaeppel at jaykaeppel@
gmail.com. Selected questions will appear in a future issue of S&C. Jay Kaeppel
SIDEWAYS STOCKS: AN OPPORTUNITY are trading. Ideally, you will want to price chart along with implied volatility
TO USE CALENDAR SPREADS? focus on heavily traded, highly liquid (black line). Note that the stock price has
A number of stocks that I am following options with tight bid/ask spreads. support around $28.42 and resistance
seem to spend a lot of time going side- • Changes in implied volatility can around $38.50.
ways and trading in a range. Is there a have a profound impact on a calendar Figure 2 displays the history of implied
low-risk way to profit from that scenario spread once the trade is entered. A volatility (IV) for 90+ day options on
using options? rise in volatility will typically help UBER. Current IV is not necessar-
A calendar spread can offer a trader a calendar spread and a decline in ily “high” nor “low” compared to its
the opportunity to make money even volatility will typically hurt a calen- historical range. In recent years it has
when a stock “goes nowhere.” Likewise, dar spread. As a result, it is typically been as low as low the 40s and spiked
if properly positioned, it can offer a preferable—though certainly not to 140% during the COVID-19 selloff
significant rate of return and a relatively in early 2020. It currently stands in the
low dollar risk. As with most option mid 50s.
strategies, the key is to understand what A calendar spread Our example trade involves:
“makes it tick.” can offer a trader the
A standard at or near-the-money put opportunity to make • Buying 1 Jan15 2021 put @ $3.33
calendar spread involves buying a put money even when a (with 112 days left until expiration)
option with a strike price near the current • Selling 1 Nov06 2020 put @ $2.25
price of the underlying stock in a further- stock “goes nowhere.” (with 42 days left until expiration)
out expiration month and simultaneously
selling another put option at the same required—to enter a calendar spread The particulars appear in Figure 3 and
strike price in a closer expiration month. when implied volatility is on the low the risk curves in Figure 4.
The basic premise of a calendar spread is end of the historical range. Some key things to note:
that the shorter-term option will experi-
ence time decay and lose time value at Example trade • This trade costs $108 to enter on a
a much faster rate than the longer-dated For our example trade we will use ticker 1-lot. This is the maximum risk on
option. But there are a few important UBER. Figure 1 displays an UBER the trade.
things to consider before entering an
at-the-money calendar spread:
• The trade will make money if the un-

derlying stock price remains within
the breakeven prices through expi-
ration. If price moves significantly
outside of this range, then losses can
occur. So you should have some rea-
son to believe that price will remain
within a given range before entering
the trade.
PROFITSOURCE BY HUBB
• You are trading two options and you

may decide to exit the trade prior to
option expiration. As a result, it is
important to consider the width of FIGURE 1: UBER PRICE CHART. In this example price chart of UBER, you can see identifiable support &
bid/ask spreads on the options you resistance levels.

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• The approximate maximum profit
is $197.
• The breakeven points for this trade
are $28.38 on the downside and
$39.42 on the upside. Note that
these breakeven prices are beyond
the support and resistance levels we
identified earlier. The hope is that the
support and/or resistance levels will
serve as a “brake” to halt any advance
or decline before price moves beyond
our breakeven points.
• The theta for this trade is $1.94.
This implies that this trade will
OPTIONSANALYSIS.COM
gain $1.94 in value each day due
solely to the passage of time—that
is, each day, the shorter-term option
will lose roughly $3.60 in value and
the longer-term option will lose only FIGURE 2: IMPLIED VOLATILITY. Shown here is an example of implied volatility on 90+-day UBER op-
roughly $1.70 in value. Since we are tions.
short the former and long the latter,

we will gain $3.60 on the shorter-
term option and lose only $1.70 on
the longer-term option.
• The vega for this trade is $2.82. This
implies that if implied volatility rises
by 1 full percentage point, then the
position will gain $2.82 in value and
vice versa. If volatility rises, the call
we hold long will gain more time FIGURE 3: PUT CALENDAR SPREAD. This shows the particulars for the example put calendar spread on
value than the call we are short and UBER stock.
if volatility declines, the call we hold
long will lose more time value than
the call we are short.
Note that greek values are not static

and will change as time goes by and
price and volatility levels change. But
for now, these are the values we have to
work with in assessing the viability of
this particular position.
Position management
From a risk standpoint, the key consid-
eration is what to do if price exceeds the
breakeven points. There is no correct
answer. The choices are:
FIGURE 4: RISK CURVES. This graph shows the risk curves for the example put calendar spread on UBER
• Exit as soon as a breakeven price stock.
is violated
• Exit as soon as a support or resistance resistance or breakeven points price. You could simply exercise
price is violated • One other technical—but impor- your long call to offset, but more
• Establish a wider “uncle” point in or- tant—consideration is to remember typically a trader will want to exit
der to give price some opportunity to that if the short put is in-the-money the position prior to getting involved
work its way back into the profit range at expiration, you will be required to in exercise.
if it only temporarily pierces support/ buy 100 shares of stock at the strike Continued on page 45
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FUTURES FOR YOU
INSIDE THE FUTURES WORLD
Want to find out how the futures markets really work? Carley Garner is the se-
nior strategist for DeCarley Trading, a division of Zaner, where she also works
as a broker. She has written five books on futures and options trading, with the
latest being Trading Commodity Options...With Creativity (July 2020), as well as
A Trader’s First Book On Commodities (third edition, October 2017) and Higher
Probability Commodity Trading (July 2016). Garner also authors widely distributed
e-newsletters; for a free subscription, visit www.DeCarleyTrading.com. To submit
a question, email her at info@carleygarnertrading.com or via www.DeCarleyTrad-
ing.com. Selected questions will appear in a future issue of S&C. Carley Garner
THE QUALITY OF FILLS amply liquid to enable a trader to get is volatile, thinly traded, or both, it is
Does the commodity brokerage make filled if the market merely reaches the possible a working stop order cannot be
a difference in the quality of the fill? noted price. For example, if a corn trader filled at a reasonable price (as determined
Also, why aren’t orders always filled works an order to sell a March contract by the protection points). In this situa-
as expected? at $4.10 (a dime higher than the current tion, stop orders go unfilled and become
The biggest lesson new traders learn price of $4.00), the trader desires to go limit orders. While this sounds like a
is there are no free lunches. Moreso, the short corn at $4.10 or higher if the market luxury because it can reduce slippage
commodity markets are not charities. rallies to the noted price. It is unlikely on most occasions, it can also go the
Orders will only be filled if there is a she will receive a fill higher than a price opposite way. In late October, the S&P
willing and able market participant to of $4.10 but she is only owed a fill if the 500 gapped lower by 20.00 points from a
take the other side of the trade at the price prints one tick above $4.10. If the Friday close to the Sunday night reopen.
desired price. The market does not owe futures market reaches precisely $4.10 One of our brokerage clients had a sell
any of us anything, not even liquidity stop working at a price on the lower end
or fair pricing. of the gap. Sadly, the CME exchange’s
Additionally, in the United States, Orders will only be filled protection functionality resulted in that
brokerage firms do not play a role in if there is a willing and order not being filled; instead, it became
making markets. Instead, they merely a limit order to sell at the previous stop
connect retail traders to a centralized able market participant price, which was never filled at all. This
exchange via trading platforms, a trading to take the other side of was particularly painful because the
desk, or an individual full-service broker. the trade at the desired S&P 500 futures proceeded to collapse
Trades are sent for execution through the price. 100 points ($5,000 per contract) in the
proper chain directly to the exchange’s session. Luckily, this was a stop order
trade-matching software (or open outcry to enter a short trade, not one to protect
pit in rare cases). Accordingly, aside from and drops, the trader might or might not a long trade. It is a little easier to stom-
minimal differences in software and receive a fill on the order. Whether or ach missing out on a big profit than it is
connection speeds, there is no difference not the order was filled would depend dealing with a failed stop-loss order and
in fill quality when entering an order on the number of orders from buyers at sitting on a large loss.
into a trading platform at one brokerage that price and time. This makes sense, For options traders, the issue of get-
versus another. In other words, a trader since the exchange cannot force another ting orders filled at an agreeable price
who experienced slippage on a stop-loss trader to accept the trade at the price you is more of a challenge. This is because
order, or who wasn’t filled on a limit order desire; the transaction can only take place options are not traded as fluidly as futures
they believed should have been, would if both traders are inclined to execute at contracts are. Thus, the lighter liquidity
have had the same experience if they that price and time. means fewer parties to take the other
were using any other brokerage. Thus, Something to be aware of regarding side of trades resulting in wider bid/ask
switching shops isn’t going to make the stop orders (which is an order to buy or spreads and the necessity to accept price
difference they are hoping for. sell a futures contract if the price gets slippage to get an order filled. In normal
For futures traders, fill quality is less of worse): The CME Group exchanges market conditions and in a reasonably
an issue. For instance, technically, a limit have a system referred to as “protection liquid commodity market, the slippage
order is one that buys or sells a futures functionality for market and stop orders.” from the price needed to execute and one
contract at a better price than the current This program defines protection points that a trader might deem fair is minimal.
market price. An order is only owed a representing prices the exchange deems But on occasion, volatility arises, causing
fill if the futures price trades through it, to be unacceptable slippage for a stop
but on many occasions, the markets are order (or market order). If the market Continued on page 45
https://libta.org
LAUNCH OF WEBSITE TO OFFER RISK AND DECISION-ANALYSIS risks in their portfolios by incorporat-
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TRADING ON MOMENTUM
Sideways Markets
Buy Support, Sell Resistance

Here’s what to look for if you want to tive, the most important factor to keep this situation requires the use of trailing
trade within a price channel. in mind is the trading range: The larger stops. We want to buy once price has
the range, the better. It is also important pivoted off the prior day’s low for at
In
by Ken Calhoun to note that standard moving averages least one day, and sell once price action
won’t be nearly as useful in this type of has pulled back off of resistance for at
nontrending markets, it can market as they are in trending markets, least a day.
be frustrating to get stopped since moving averages will appear in
out when trends do not con- Step-by-step action plan
tinue in your favor. Here’s how you can start using this
The S&P 500 index has been in a This strategy gives strategy:
sideways consolidation from Septem- you clarity on exactly
ber through November 2020, as seen where to enter and Step 1: After a sustained downtrend
in Figure 1 (SPY). In this situation, where to exit, without of at least 10 days, look for a techni-
you may find it more successful to buy cal pivot signal, such as the hammer
pivots off of support levels and sell into the guesswork. seen on September 21 in Figure 1,
resistance. and enter your position.
the middle of the trading range, as seen
When price action cycles by the blue and red 50 and 100 SMA Step 2: Set your exit target at just
up and down (simple moving average) lines, illustrated beneath the prior high; which is $360
Sideways markets are always difficult to in Figure 1. Developing a trading plan in this example.
trade. From a technical analysis perspec- designed to capitalize on price action in
eSIGNAL
FIGURE 1: BUYING SUPPORT, SELLING RESISTANCE (SPY). This shows an example of buying off of obvious support levels within the channel.

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Step 3: Either close the entire position wait far too long to exit their trades to
or scale out of it once price action has book a profit. You need to initiate
gotten close to the prior high. Another reason why this strategy is your trade with full size
valuable is it gives you clarity on exactly
Step 4: Repeat this for as long as where to enter and where to exit, without
from the beginning once
price action cycles up and down in the guesswork that causes missed trade it has pivoted off of
a defined channel. opportunities. support.
Insights: Why this Trade management tips it to a single additional trade while price
technique works Because the duration of the trades is action is still in the trading channel.
As with most trading strategies, support relatively brief, it is important to manage
& resistance levels are obvious and both your entries and exits with a bit more Ken Calhoun moderates a live trading
traded by the majority of professional precision compared to trading trending room for active traders. He is the founder
traders. The most important thing to keep instruments. From a size perspective, you of TradeMastery.com, an interactive
in mind is exiting on time. In working do not have the luxury of time to scale in webinar site for active traders, and is
with many traders over two decades, I’ve and build larger positions. So you need a UCLA alumnus.
consistently found this to be the single to initiate your trade with full size from
biggest error that traders make. They the beginning once it has pivoted off of
don’t sell into resistance and instead support. If you do scale in and out, limit

KAEPPEL the two breakeven points. Conversely,
Continued from page 41 If properly positioned, if IV increases, the net effect would
be to widen the range between the two
it can offer a breakeven points as our long call would
On the flip side, in terms of profit- significant rate of gain more time premium than our short
taking, a trader will likely need to exhibit return and a relatively call.
some patience since most of the profits low dollar risk.
will accumulate as the short option nears ‡ProfitSource (HUBB);
expiration. ‡Optionsanalysis.com
One final wild card to consider: If IV vega—would be more adversely affected ‡See Editorial Resource Index
declines after the trade is entered, our than our short option. The net effect
long option—because it has a higher would be to narrow the range between
FUTURES FOR YOU

GARNER unsuspecting. do it at 26 cents. Just like the buyer of
Continued from page 42 Let’s consider an example: A trader this spread wouldn’t appreciate being
wishing to execute a butterfly option forced to pay 28 cents, the seller of the
spread in silver might estimate a fair spread cannot be required to accept a
wider spreads between the bid and ask price of the spread to be 26 cents. Yet, lower price than they desire. Again, for
price of an option. As a result, another the bid price of the spread might be 24 a transaction to occur, both parties must
trader might not be willing to take the cents and the ask 28 cents. Unless the be willing and able. A trader should never
other side of a trader’s order at the ex- trader is willing to buy the ask price (28 assume they can buy or sell an instrument
pected fair price. This can be frustrating, cents), he should not expect a fill, nor at the price their software claims is fair;
but it shouldn’t be; as mentioned before, get upset and feel victimized when one market participation at any given price
the markets are not a charity. In fact, doesn’t occur. This is because at least is voluntary, not obligatory.
they are closer to the opposite. Markets one other trader is willing to take the
don’t volunteer to help those in need; other side of the trade at 28 cents, but
they forcefully accept donations of the there are currently no traders willing to
https://libta.org
The focus of Traders’ • Traders.com → S&C Magazine → Traders’
Tips this month is Perry Tips
Kaufman’s article in this
At Traders.com you can also right-click on any
issue, “A Fresh Look At
chart to open it in a new tab or window and view
Short-Term Patterns.”
the chart at a much larger size.
Here, we present the
The Traders’ Tips section is provided to help read-
January 2021 Traders’
ers implement a selected technique from an article in
Tips code with possible
this issue or another recent issue. The entries here
implementations in vari-
are contributed by software developers or program-
ous software.
mers for software that is capable of customization.
The code for the following Traders’ Tips selections
is posted here:
bulltrendcases( 0 ),
beartrendcases( 0 ),
cday( 0 ),
F TRADESTATION: JANUARY 2021 TRADERS’ TIPS CODE comphigh( 0 ),
In his article in this issue, “A Fresh Look At Short-Term Pat- complow( 0 ),
outsidebull( false ),
terns,” author Perry Kaufman introduces some test methods outsidebear( false ),
to analyze various short-term price patterns to determine how ratio( 0 ),
they work with various stocks and ETFs. The analysis includes ndays( 0 ),
adate( " " ),
results with and without a trend filter. The trend filter used size( 0 ),
is an 80-period simple moving average and the article also back1( 0 ),
provided the criteria for the various patterns used to determine back2( 0 ),
back3( 0 ),
if an entry is triggered. back4( 0 );
Shown here is the indicator code based on the author’s
work. A simple Plot statement was added to indicate that arrays:
bullreturns[6]( 0 ),
the code was running, but the code is designed to export the bearreturns[6]( 0 ),
results to a text file. bulltrendreturns[6]( 0 ),
beartrendreturns[6]( 0 );
Indicator: TASC JAN 2021
// TASC JAN 2021

// PJK Short-Term patterns
// Look at reliability of short-term pat-
terns with
// and without a trend filter.
// Look at using noise as a qualifier
// Copyright 2020, P.J.Kaufman. All
rights reserved
inputs:
trendper( 0 ),
usekeyreversal( false ),
useislandreversal( false ),
usecompression( 0 ),
usegaps( 0 ),
useoutsideday( false ),
usewiderangingday( 0 ),
forecast( 5 ),
investment( 10000 );
variables:
trend( 0 ),
pattern( " " ),
bullcases( 0 ),
bearcases( 0 ),
compression( false ),
gap( false ),
outsideday( false ),
widerangingday( false ),
bullpattern( false ),
bearpattern( false ), FIGURE 1: TRADESTATION. Shown here is a TradeStation daily chart of SPY with the indicator applied. The plot is
bulltrend( false ),
used to indicate that the code is running and does not plot a significant number in terms of the article content. The code
beartrend( false ),
is designed to export information to a file.

https://libta.org
// trend if trend < trend[1] then
if trendper > 0 then begin
begin beartrend = true;
trend = average( close, trendper ); beartrendcases = beartrendcases + 1;
end; end;
end
//============================================ // bullcases island reversal
// 3-day compression else if high < low[1] and close > open then
//============================================ begin
if usecompression = 3 then ndays = 1;
begin bullcases = bullcases + 1;
cday = truerange[3]; bullpattern = true;
size = investment / close;
compression = truerange < cday
and truerange[1] < cday if trend > trend[1] then
and truerange[2] < cday; begin
end; bulltrend = true;
bulltrendcases = bulltrendcases + 1;
//============================================== end;
// key reversals end;
//============================================== end;
if usekeyreversal and ndays = 0 then
begin //===============================================
pattern = "Key Reversal"; // compression
//==============================================
// key bearcases reversal if usecompression > 0 and ndays = 0 then
if high > high[1] begin
and low < low[1] pattern = "3-Day compression";
and close < low[1] then back4 = truerange[4];
begin back3 = truerange[3];
ndays = 1; back2 = truerange[2];
bearcases = bearcases + 1; back1 = truerange[1];
bearpattern = true; compression = back4 > back3 and back4 > back2
size = investment / close; and back4 > back1;
if trend < trend[1] then if compression then

begin begin
beartrend = true; comphigh = Highest( High[1], usecompression );
beartrendcases = beartrendcases + 1; complow = Lowest( Low[1], usecompression );
end;
end // bearcases compression
// key bullcases reversal if close < complow then
else if high > high[1] begin
and low < low[1] ndays = 1;
and close > high[1] then bearcases = bearcases + 1;
begin bearpattern = true;
ndays = 1; size = investment / close;
bullcases = bullcases + 1;
bullpattern = true; if trend < trend[1] then
size = investment / close; begin
beartrend = true;
if trend > trend[1] then beartrendcases = beartrendcases + 1;
begin end;
bulltrend = true; end
bulltrendcases = bulltrendcases + 1; // bullcases compression
end; else if close > comphigh then
end; begin
end; ndays = 1;
//=============================================== bullpattern = true;
// island reversals size = investment / close;
//===============================================
if useislandreversal and ndays = 0 then if trend > trend[1] then
begin begin
pattern = "Island Reversal"; bulltrend = true;
// bearcases island reversal end;
if low > high[1] and close < open then end;
begin end;
ndays = 1; end;
bearcases = bearcases + 1;
bearpattern = true; //================================================
size = investment / close; // Outside day (or wide ranging day) with close in
// upper/lower 25%

https://libta.org
//================================================ beartrend = true;
if (useoutsideday or usewiderangingday <> 0) beartrendcases = beartrendcases + 1;
and ndays = 0 then end;
begin end
if useoutsideday then else if ratio >= usegaps then
pattern = "Outside Day" begin
else // bullcases gap
pattern = "Wide Ranging Day"; ndays = 1;
outsidebull = high > high[1] and low < low[1] bullpattern = true;
and close > 0.75 * ( high - low ) + low; size = investment / close;
outsidebear = high > high[1] and low < low[1] if trend > trend[1] then
and close < 0.25 * (high - low ) + low; begin
bulltrend = true;
ratio = 0; bulltrendcases = bulltrendcases + 1;
end;
if usewiderangingday <> 0 then end;
begin end;
ratio = truerange / avgtruerange( 20 );
end; //================================================
// accumulated profits over next 5 days
// bearcases outside day //================================================
if outsidebear and if ndays > 1 then
( ratio = 0 begin
or ratio > usewiderangingday ) then if bullpattern then
begin begin
ndays = 1; bullreturns[ndays] = bullreturns[ndays] +
bearcases = bearcases + 1; size * ( close - close[ndays-1] );
bearpattern = true; end;
size = investment / close;
if bearpattern then
if trend < trend[1] then begin
begin bearreturns[ndays] = bearreturns[ndays] +
beartrend = true; size * ( close[ndays-1] - close );
beartrendcases = beartrendcases + 1; end;
end;
end if bulltrend then
// bullcases outside day begin
else if outsidebull bulltrendreturns[ndays] =
and (ratio = 0 bulltrendreturns[ndays] +
or ratio > usewiderangingday) then size * ( close - close[ndays-1] );
begin end;
ndays = 1;
bullcases = bullcases + 1; if beartrend then
bullpattern = true; begin
size = investment / close; beartrendreturns[ndays] =
beartrendreturns[ndays] +
if trend > trend[1] then size * ( close[ndays-1] - close );
begin end;
bulltrend = true; end;
end; if ndays > 0 then
end; begin
end; ndays = ndays + 1;
end;
//================================================
// Gap opening with profits in direction of the gap //================================================
//================================================ // summary
if usegaps > 0 and ndays = 0 then //================================================
begin if lastbaronchartex then
pattern = "Gap Opening"; begin
ratio = ( open - close[1] )/avgtruerange( 20 )[1]; adate = ELdatetostring( Date );
// downward gap // print headers to file

if ratio < 0 and -ratio >= usegaps then print(
begin file( "c:\tradestation\Short-Term Patterns.csv"),
ndays = 1; "Date,Pattern,Cases,Bull Cases,BullPL1,BullPL2,"
bearcases = bearcases + 1; + "BullPL3,BullPL4,BullPL5,Bear Cases,",
bearpattern = true; "BearPL1,BearPL2,BearPL3,BearPL4,BearPL5,,"
size = investment / close; + "TrendCases,",
"Bull Trend Cases,BullTrPL1,BullTrPL2,BullTrPL3"
if trend < trend[1] then + ",BullTrPL4,BullTrPL5,",
begin "Bear Trend Cases,BearTrPL1,BearTrPL2,BearTrPL3,"

https://libta.org
+
"BearTrPL4,BearTrPL5" );
// print the data to file

print(
file( "c:\tradestation\
Short-Term Patterns.
csv"),
adate, ",",
pattern, ",",
bullcases+bearcases:8:0,
",",
bullcases:8:0, ",",
Bullreturns[2]:8:0, ",",
bearcases:5:0, ",",
Bearreturns[2]:8:0, ",",
Bearreturns[6]:8:0, ",,",
FIGURE 2: THINKORSWIM. Here is an example of the study. The returns calculation from 1 to 5 days for bullish key reversals is shown
bulltrendcases+beartr
endcases:5:0, ",", in the upper pane with bearish key reversal returns in the lower pane. Log scale is enabled for the price pane to view the price moves
bulltrendcases:5:0, ",", more distinctly.
Bulltrendreturns[2]:8:0,
",",
Bulltrendreturns[3]:8:0, ",",
beartrendcases:5:0, ",", F THINKORSWIM: JANUARY 2021 TRADERS’ TIPS CODE
Beartrendreturns[2]:8:0, ",",
Beartrendreturns[3]:8:0, ",",
We have put together a study based on the article in this issue
Beartrendreturns[4]:8:0, ",", “A Fresh Look At Short-Term Patterns (With And Without A
Beartrendreturns[5]:8:0, ",", Trend Filter)” by Perry Kaufman.
Beartrendreturns[6]:8:0 );
end;
We built the study referenced by using our proprietary
scripting language, thinkscript. To ease the loading process,
//================================================ simply click on http://tos.mx/pnEzI0G or enter it into the ad-
// end of trade
//================================================
dress into setup → open shared item from within thinkor-
if ndays > 6 then swim, then choose view thinkScript study and name it “Re-
begin turnsCalculationForPricePatterns” or whatever you like so
bullpattern = false;
bearpattern = false;
you can identify it. You can then add the study to your charts
bulltrend = false; from the edit studies menu from within the charts tab.
beartrend = false; The example chart shown in Figure 2 is the returns cal-
ndays = 0;
end;
culation from 1 to 5 days for bullish key reversals (upper
pane) and bearish key reversals (lower pane). Also, log scale
Plot1( Close ); // dummy plot to show code is running is enabled for the price pane to see the price moves more
distinctly. The price pattern to be used, its direction, whether
To download the EasyLanguage code for TradeStation or not to apply the trend filter, and investment size are all
10, please visit our TradeStation and EasyLanguage support configurable via inputs. Please see Perry Kaufman’s article
forum. The files for this article can be found here: https:// for more information on how to read the study.
community.tradestation.com/discussions/Topic.aspx?Topic_ —thinkorswim
ID=190289. A division of TD Ameritrade, Inc.
A sample chart is shown in Figure 1. www.thinkorswim.com
This article is for informational purposes. No type of
trading or investment recommendation, advice, or strategy
is being made, given, or in any manner provided by TradeS-
tation Securities or its affiliates.
—Chris Imhof
TradeStation Securities, Inc.
F WEALTH-LAB: JANUARY 2021 TRADERS’ TIPS CODE
www.TradeStation.com The Wealth-Lab strategy code for the short-term pattern
scanner described by Perry Kaufman in his article in this

https://libta.org
issue, “A Fresh Look At
Short-Term Patterns,” is
presented here.
With parameter slid-
ers at the bottom left
of your Wealth-Lab
workspace, the included
strategy demonstrates
how to switch between
the patterns interac-
tively when viewing a
chart. Dragging the pat-
tern slider to the left or
to the right will change
between the six choices
and make the chart up-
date with backtested
trades.
For example, Figure FIGURE 3: WEALTH-LAB. Sample entries are shown on a daily chart of QLD. Data provided by Yahoo! Finance.
3 illustrates one bearish
and two bullish key re- /* key reversal */
versal trades created on the next open following the pattern bool keyRevBear = High[bar] > High[bar - 1] &&
and exiting 3 days after. Through another parameter slider, Low[bar] < Low[bar - 1] && Close[bar] < Low[bar - 1];
bool keyRevBull = High[bar] > High[bar - 1] &&
you can control exits after N bars in a trade. Low[bar] < Low[bar - 1] && Close[bar] > High[bar - 1];
To avoid copy/paste, hitting Ctrl-O and choosing down-
load in Wealth-Lab gets you the downloadable strategy un- /* island reversal */
bool islRevBear = Low[bar] > High[bar - 1] &&
der the “Chart patterns” folder. Close[bar] < Open[bar];
bool islRevBull = High[bar] < Low[bar - 1] &&
WEALTH-LAB CODE Close[bar] > Open[bar];
using System; /* outside day */
using System.Collections.Generic; bool outsideBull = this.isOutsideBar(bar) &&
using System.Text; Close[bar] > Low[bar] + ( 0.75 * (High[bar] - Low[bar]));
using System.Drawing; bool outsideBear = this.isOutsideBar(bar) &&
using WealthLab; Close[bar] < Low[bar] + ( 0.25 * (High[bar] - Low[bar]));
using WealthLab.Indicators;
/* Requires Community Components installed */ /* wide range day */
using Community.Components; var ratio = TrueRange.Series(Bars)[bar] / atr[bar];
bool isWRBBull = outsideBull && (ratio > 1.5);
namespace WealthLab.Strategies bool isWRBBear = outsideBear && (ratio > 1.5);
{
public class TASCJan2021 : WealthScript /* 3-day compression */
{ bool compression = CumDown.Series(TrueRange.
private StrategyParameter paramPattern; Series(Bars), 1)[bar] >= 3;
private StrategyParameter paramExitDays;
/* gap open */
public TASCJan2021() bool isGapUp = (this.isGap(bar) == CommonSignalsEx.
{ GapType.FullUp) && (Open[bar] > Close[bar] + 0.5 * atr[bar]);
paramPattern = CreateParameter("Pattern", 1, 1, 6, 1); bool isGapDown = (this.isGap(bar) == CommonSig-
paramExitDays = CreateParameter("Exit after", 3, 1, 10, nalsEx.GapType.FullDown) && (Open[bar] < Close[bar] + 0.5 *
1); atr[bar]);
}
/* trend filter */
protected override void Execute() bool isBullish = Close[bar] > trendFilter[bar];
{ bool isBearish = Close[bar] < trendFilter[bar];
var _pattern = paramPattern.ValueInt;
var _exitAfter = paramExitDays.ValueInt; if (IsLastPositionActive)
int atrPeriod = 20, maPeriod = 80; {
double tick = Bars.SymbolInfo.Tick; /* Exit after N days */
var atr = ATR.Series(Bars, atrPeriod); Position p = LastPosition;
var trendFilter = SMA.Series(Close, maPeriod); if (bar + 1 - p.EntryBar >= _exitAfter)
ExitAtMarket( bar + 1, p, string.Format("After
for(int bar = GetTradingLoopStartBar( Math. {0}", _exitAfter));
Max(atrPeriod,maPeriod)); bar < Bars.Count; bar++) }
{ else

https://libta.org
{
switch (_pat-
tern)
{
case 1:
if( key-
RevBear && isBearish)
ShortAtMarket( bar + 1,
"KeyRevBear");
if(
keyRevBull && isBullish)
BuyAtMarket( bar + 1,
"KeyRevBull");
break;
case 2:
if
(islRevBear && isBearish)
ShortAtMarket( bar + 1,
"IslRevBear");
if
(islRevBull && isBullish)
BuyAtMarket( bar + 1,
"IslRevBull");
break;
FIGURE 4: NINJATRADER. The PJKShortTermPatterns indicator is displayed on a daily MSFT chart from November 2019 to Novem-
case 3:
if (out- ber 2020 with TrendPer = 2 and Use Key Reversal = true.
sideBear && isBearish)
ShortAtMarket( bar + 1, Patterns,” is available for download at the following links for
"OutsideBear");
if (outsideBull && isBullish) BuyAtMarket( bar NinjaTrader 8 and for NinjaTrader 7:
+ 1, "OutsideBull");
break; NinjaTrader 8: www.ninjatrader.com/SC/January2021SCNT8.zip
case 4: NinjaTrader 7: www.ninjatrader.com/SC/January2021SCNT7.zip
if (isWRBBear && isBearish) ShortAtMarket(
bar + 1, "WRBBear"); Once the file is downloaded, you can import the indicator
if (isWRBBull && isBullish) BuyAtMarket( bar into NinjaTader 8 from within the control center by selecting
+ 1, "WRBBull");
break; Tools → Import → NinjaScript Add-On and then selecting
case 5: the downloaded file for NinjaTrader 8. To import in Ninja-
if (compression) Trader 7 from within the control center window, select the
{
if(BuyAtStop(bar+1, Highest.Series(High,3) menu File → Utilities → Import NinjaScript and select the
[bar], "CompressionBull") ==null) downloaded file.
ShortAtStop( bar + 1, Lowest. You can review the indicator’s source code in NinjaTrader
Series(Low, 3)[bar], "CompressionBear");
} 8 by selecting the menu New → NinjaScript Editor → Indica-
break; tors from within the control center window and selecting the
case 6: PJKShortTermPatterns file. You can review the indicator’s
if (isGapUp && isBullish) BuyAtClose( bar,
"GapUp"); source code in NinjaTrader 7 by selecting the menu Tools →
if (isGapDown && isBearish) ShortAtClose( Edit NinjaScript → Indicator from within the control center
bar, "GapDown"); window and selecting the PJKShortTermPatterns file.
break;
default: break; NinjaScript uses compiled DLLs that run native, not in-
} terpreted, which provides you with the highest performance
} possible.
}
} A sample chart displaying the indicator is shown in Figure
} 4.
} —Chris Lauber
NinjaTrader, LLC
—Gene Geren (Eugene) www.ninjatrader.com
Wealth-Lab team
www.wealth-lab.com
F NEUROSHELL TRADER: JANUARY 2021

TRADERS’ TIPS CODE
A short-term pattern trading system such as the one
F NINJATRADER: JANUARY 2021 TRADERS’ TIPS CODE discussed by Perry Kaufman in his article in this issue can be
The PJKShortTermPatterns indicator, as presented in the article easily implemented in NeuroShell Trader by combining a few
by Perry Kaufman in this issue, “A Fresh Look at Short-Term of NeuroShell Trader’s 800+ indicators.

https://libta.org
For this example,
we’ve used the island
reversal pattern, but you
can choose from any
of the 90 candlestick
and traditional trading
patterns included in
NeuroShell Trader. To
create the trading sys-
tem, simply select new
trading strategy from
the insert menu and en-
ter the following in the
appropriate locations
of the trading strategy
wizard:
BUY LONG CONDI-
TIONS: [All of which
must be true]
Key Reversal: Bullish
Flag(High,Low,Close)
A>B(Momentum(Avg(
Close,80),1),0)
FIGURE 5: NEUROSHELL TRADER. This NeuroShell Trader chart shows the key reversal pattern applied to Walmart.
SELL LONG CONDI-
TIONS: [All of which
must be true]
BarsSinceFill>=X(Trading Strategy,3) the article “A Fresh Look At Short-Term Patterns” in this is-
sue, Perry Kaufman tests several new patterns with major US
SELL SHORT CONDITIONS: [All of which must be true] stocks and indexes, and with an additional trend filter.
Key Reversal: Bearish Flag(High,Low,Close)
A<B(Momentum(Avg(Close,80),1),0) The 6 patterns tested were key reversal, island reversal,
outside days, wide-ranging days, 3-day compression, and
COVER SHORT CONDITIONS: [All of which must be true] gap opening. All are calculated from the previous 3 or 4
BarsSinceFill>=X(Trading Strategy,3)
candles and give a buy or sell signal. Here’s how they look
POSITION SIZING METHOD: coded as indicators in C:
Fixed Dollar
10,000.00 Dollars var cdlKeyReversal()
{
After entering the system conditions, you can also choose if(priceHigh(0) > priceHigh(1) && priceLow(0) < priceLow(1))
{
whether the parameters should be genetically optimized. Af- if(priceClose(0) < priceLow(1)) return -100; // sell
ter backtesting the trading strategy, use the detailed analysis if(priceClose(0) > priceHigh(1)) return 100; // buy
button to view the backtest and trade-by-trade statistics for }
return 0;
the system. }
NeuroShell Trader users can go to the Stocks & Com-
modities section of the NeuroShell Trader free technical
var cdl3DayCompression()
support website to download a copy of this or any previous {
Traders’ Tips. vars TRs = series(TrueRange(),4);
—Marge Sherald, Ward Systems Group, Inc. if(TRs[0] < TRs[3] && TRs[1] < TRs[3] && TRs[2] < TRs[3])
301 662-7950, sales@wardsystems.com return 100;
else
www.neuroshell.com return 0;
}
var cdlIslandReversal()
F THE ZORRO PROJECT: JANUARY 2021 {
if(priceLow(0) > priceHigh(1) && priceClose(0) < priceOpen(0))
TRADERS’ TIPS CODE return -100; // sell
Japanese traders developed candlestick charts and if(priceLow(1) < priceHigh(0) && priceClose(0) > priceOpen(0))
candlestick patterns in the 17th century. Some traders believe return 100; // buy
else return 0;
that those patterns are still valid today. But since the 21st- }
century financial markets are quite different from the Kyoto
rice market of 300 years ago, new patterns were invented. In var cdlOutsideDay()

https://libta.org
{ Symbol cases Day 1 Day 2 Day 3 Day 4 Day 5
if(priceHigh(0) > priceHigh(1) && priceLow(0) < SPY 265/82 1071/-604 3290/50 5615/-2910 5675/-3681 6978/-5998
priceLow(1))
{ QQQ 235/68 -695/-2639 -293/-5285 1977/-9691 5434/-11494 6820/-13151
if(priceClose(0) < 0.75*priceLow(0) + IWM 149/82 956/-121 1113/1497 2096/179 2909/2132 4466/1356
0.25*priceHigh(0)) AAPL 198/60 3994/-1240 3198/-2862 4214/-5816 8094/-5577 11433/-6916
return -100; // sell AMZN 158/34 -367/-2245 1686/-5913 1232/-6319 4469/-7560 8272/-6198
if(priceClose(0) > 0.25*priceLow(0) + GE 129/89 -283/655 -2680/4809 -3070/4147 -2321/6090 -1472/2813
0.75*priceHigh(0)) WMT 82/80 -678/-1166 -111/-508 -82/-1009 -1140/-713 464/-1995
return 100; // buy
} TSLA 126/62 5200/-5307 13983/-5237 21086/-4802 33549/-2898 43231/-2216
return 0; FIGURE 6: ZORRO. Example result for the gap opening pattern with trend.
}
var cdlWideRangeDays() rt);

{ printf(" %s: %.0f/%.0f ",Algo,
if(TrueRange() > 1.5*ATR(20)) WinLong-LossLong,WinShort-LossShort);
return cdlOutsideDay(); }
else }} // asset/algo loops
return 0; }
}
Here are some explanations for the code: At the start of
var cdlGapOpening()
{ the run() function, the pattern and the trend mode are set up.
var Ratio = (priceOpen(0) - priceClose(1))/ATR(20); For convenience we’re using a function pointer that is set to
if(Ratio >= 0.5) return 100; the pattern function to be tested. The test uses two nested
if(Ratio <= -0.5) return -100;
return 0; loops, first for selecting the stocks, and second for selecting
} the trade lifetime to get the results from a 1-day trade up to
a 5-day trade. The predefined Itor2 variable is the iterator
Following the convention of the classic candle patterns of the second loop and runs from 0 to 4, so we just use it
from the TA indicator library, the pattern functions return to set the LifeTime variable for the subsequent trade. The
100 for a bullish pattern, -100 for a bearish pattern, and 0 number of stocks purchased is calculated in the same way as
for no pattern. in Kaufman’s article and code. The results are printed in the
We will test the patterns with IWM, AAPL, AMZN, GE, EXITRUN at the last day of the simulation.
WMT, and TSLA stocks, as well as SPY and QQQ index The table in Figure 6 shows an example result for the gap
ETFs. There are two differences from the test in Kaufman’s opening pattern with trend.
article. First, we will use not merely price differences, but The numbers are the returns of long/short trades in US
will simulate real trades with spread and commission. So dollars.
the returns will be a bit worse but more realistic. Second, The pattern functions and the test script can be down-
we test from 2010 to 2020 to help ensure that the results of loaded from the 2020 script repository on https://financial-
all assets are comparable. Some of them, like TSLA, didn’t hacker.com.
exist before 2010. The Zorro platform can be downloaded from https://zor-
Here is the test script: ro-project.com.
var pattern(); // function pointer —Petra Volkova
The Zorro Project by oP group Germany
void run() www.zorro-project.com
{
pattern = cdlGapOpening; // place pattern function here
bool WithTrend = true; // false without trend
BarPeriod = 1440; // 1 day
StartDate = 2010; // TSLA went public in 2010 ®
var Investment = 10000;
while(asset(loop("SPY","QQQ","IWM","AAPL","AMZN","GE","W F OPTUMA: JANUARY 2021 TRADERS’ TIPS CODE

MT","TSLA"))) { Here is a list of formulas for use with Optuma based on the
vars Trend = series(SMA(seriesC(),80)); article in this issue by Perry Kaufman, “A Fresh Look At
while(algo(loop("Day1","Day2","Day3","Day4","Day5"))) {
Lots = Investment/priceClose(); Short-Term Patterns.”
LifeTime = Itor2+1; // life time in days To include the 80-trend filter, users just need to add ‘and
if(pattern() > 0 && (!WithTrend || rising(Trend))) MA(BARS=80) IsUp’ for bullish trend, or ‘MA(BARS=80)
enterLong();
else if(pattern() < 0 && (!WithTrend || falling(Trend))) IsDown’ for bearish.
enterShort();
if(is(EXITRUN)) { // print statistics in the last run Key Revesal - Bullish
if(Itor2 == 0) // first loop run BARTYPES().Outside and CLOSE()>HIGH()[1]
printf("\n%s Cases %i/%i -",Asset,
Key Reversal - Bearish
NumWinLong+NumLossLong,NumWinShort+NumLossSho
BARTYPES().Outside and CLOSE()<LOW()[1]

https://libta.org
Island Reversal - Bullish
HIGH()<LOW()[1] and CLOSE()>OPEN()
Island Reversal - Bearish

LOW()>HIGH()[1] and CLOSE()<OPEN()
Compression - Bullish
TR1 = TRUERANGE();
Compression = (TR1[4] > TR1[3]) and (TR1[4]
> TR1[2]) and (TR1[4] > TR1[1]);
CompHigh = HIGHESTHIGH(BARS=4);
Compression and CLOSE() CrossesAbove
CompHigh
Compression - Bearish
TR1 = TRUERANGE();
Compression = (TR1[4] > TR1[3]) and (TR1[4]
> TR1[2]) and (TR1[4] > TR1[1]);
CompLow = LOWESTLOW(BARS=4);
Compression and CLOSE() CrossesBelow
CompLow
Outside Days - Bullish

BARTYPES().Outside and
CLOSE() > 0.75*(HIGH() - LOW()) +LOW()
Outside Days - Bearish

BARTYPES().Outside and FIGURE 7: OPTUMA. This chart displays sample test results for the bullish opening gap pattern. In this test,
CLOSE() < 0.25*(HIGH() - LOW()) +LOW() there were 1,502 total signals showing performance 5 days before and 10 days after each signal.
Wide Ranging Days - Bullish
ATR1 = ATR(BARS=1);
ATR20 = ATR(BARS=20, MULT=1.50);
(ATR1>ATR20) and
CLOSE() > 0.75*(HIGH() - LOW()) +LOW()
Wide Ranging Days - Bearish

ATR1 = ATR(BARS=1);
ATR20 = ATR(BARS=20, MULT=1.50);
(ATR1>ATR20) and
CLOSE() < 0.25*(HIGH() - LOW()) +LOW()
Opening Gaps - Bullish

FIGURE 8: OPTUMA. For the instruments tested you can view the trade statistics and metrics, including
ATR20=ATR(BARS=20, MULT=0.50);
OPEN()>(CLOSE()[1]+ATR20) and number of signals found, probability of gain or loss, standard deviation, and mean.
CLOSE()>OPEN()
Opening Gaps - Bearish

ATR20=ATR(BARS=20, MULT=0.50);
OPEN()<(CLOSE()[1]-ATR20) and
CLOSE()<OPEN()
Testing
Optuma has a Signal Testing module that can
run these formulas over any timeframe and
universe of stocks with a couple of clicks,
giving the results in seconds. The results
show the average percentage returns, and
other statistics (including 20th/80th per-
centiles, standard deviation, and a Monte
Carlo simulation).
Here are two example tests since Janu-
ary 2000 on the three ETFs and five stocks
used in the article.
Opening gap—Bullish
Figure 7 shows 1,502 total signals showing
performance 5 days before and 10 days after FIGURE 9: OPTUMA. This chart displays sample test results for the bearish compression pattern with a trend
filter.

https://libta.org
each signal.
After 10 days, there was a probability
of gain of 58%, for an average return of
0.51%. The individual instrument break-
down is as follows: 289 signals for SPY
with probability of gain after 10 days of
60.5%, with a mean gain of 0.06%. TSLA
had a higher mean return (4.3%) but a
lower probability of gain (56%) and a
higher standard deviation (15.5%) in the FIGURE 10: OPTUMA. For the instruments tested you can view the trade statistics and metrics.
82 events. (See Figure 8.)
Compression—Bearish with trend filter

For this test, we had 433 results showing
an average gain after 10 days of 0.3% (see
Figure 9). The individual components are
shown in Figure 10.
—support@optuma.com
F TRADERSSTUDIO:
JANUARY 2021
TRADERS’ TIPS CODE
The importable TradersStudio files based
on Perry Kaufman’s article in this issue,
“A Fresh Look At Short-Term Patterns
(With And Without A Trend Filter),” can
be obtained on request via email to info@
TradersEdgeSystems.com. The code is also
available on this magazine’s website at Trad-
ers.com in the Traders’ Tips section.
Code for the short-term patterns in the FIGURE 11: TRADERSSTUDIO. Equity curve for BullGap and BearGap trading 100 shares per trade of the
article is included in the system file ST_ NASDAQ 100 without the trend filter.
Patterns_Sys both with and without the
trend filter depending on the input param-
eters. All of the patterns are coded on one
file so if all of the buy and sell rules for the
patterns are uncommented then the back-
test will run all the patterns in one run. To
test each pattern individually, simply com-
ment out all the other patterns not of cur-
rent interest. The way I have supplied the
code is with all but the BullGap and Bear-
Gap patterns commented out. Hence, the
only one that will run on a backtest is the
gap patterns. Figure 11 shows the equity
curve of the BullGap and BearGap trading
100 shares per trade of the NASDAQ 100
list of stocks from 2000 to 2014 with the
trend filter turned off. Figure 12 shows the
equity curve for the same set except that
the trend filter was turned on. The trend
filter did not improve the returns.
—Richard Denning
info@TradersEdgeSystems.com FIGURE 12: TRADERSSTUDIO. Equity curve for BullGap and BearGap trading 100 shares per trade of the
for TradersStudio NASDAQ 100 with the trend filter.

https://libta.org
FIGURE 13: AIQ. Equity curve (blue) for Bull Outside Day pattern compared to the
NASDAQ 100 index (red) from 1999 to 2020, all trades closed on 4th bar’s open
after entry.
F AIQ: JANUARY 2021 TRADERS’ TIPS CODE

The importable AIQ EDS file based on Perry Kauf-
man’s article in this issue, “A Fresh Look At Short-
Term Patterns (With And Without A Trend Filter),” can be
FIGURE 14: AIQ. Account Statistics Analysis report for the portfolio simulation.
obtained on request via email to info@TradersEdgeSystems.
com. The code is also available on this magazine’s website at
Traders.com in the Traders’ Tips section. in Figure 13 and the ASA report for the test is shown in
Code for short-term patterns in the article is included in Figure 14.
—Richard Denning
the EDS file both with and without the trend filter. I ran a info@TradersEdgeSystems.com
portfolio simulation trading NASDAQ 100 stocks with the for AIQ Systems
Bull Outside Day pattern from 1999 to 2020. The equity
curve (blue) compared to the NASDAQ index (red) is shown
OSOBA/FEAR
We can choose to think the
riods of stress or fear. We can reactivate our prefrontal cortex
thoughts that will maximize
by staying present and reminding ourselves that the fear we our potential for right action
feel is simply a chemical process happening deep inside our when we trade.
brain. And we can control that chemical process through the
thoughts that we allow ourselves to think.
Stella Osoba is a financial writer and trader. She has earned FURTHER READING
the Charted Market Technician designation and has writ- Watts, Dickson G. [1880]. Speculation As A Fine Art And
ten for several financial websites and publications. She is Thoughts On Life.
a frequent contributor to this magazine and to the Traders. Livermore, Jesse [1940]. How To Trade In Stocks.
com Advantage online publication. She may be reached via
email at stellaosoba@gmail.com.
https://libta.org
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FUTURES LIQUIDITY
T
rading liquidity is often over- very high volumes. The greatest number three-year period. Thus, all numbers in
looked as a key technical of dots indicates the greatest activity; this column have an equal dollar value.
measurement in the analysis futures with one or no dots show little Columns indicating percent margin
and selection of commodity activity and are therefore less desirable and effective percent margin provide
futures. The following explains how to for speculators. a helpful comparison for traders who
read the futures liquidity chart pub- Courtesy of CBOT wish to place their margin money ef-
lished by Technical Analysis of Stocks ficiently. The effective percent margin
& Commodities every month. is determined by dividing the margin
value ($) by the three-year price range of
Commodity futures contract dollar value, and then multiply-
The futures liquidity chart shown being by one hundred.
low is intended to rank publicly traded
futures contracts in order of liquidity. Stocks
Relative contract liquidity is indicated Trading liquidity has a significant ef-
by the number of dots on the right-hand fect on the change in price of a secu-
side of the chart. rity. Theoretically, trading activity can
This liquidity ranking is produced by serve as a proxy for trading liquidity
multiplying contract point value times All futures listed are weighted equally and equals the total volume for a given
the maximum conceivable price motion under “contracts to trade for equal dol- period expressed as a percentage of the
(based on the past three years’ historical lar profit.” This is done by multiplying total number of shares outstanding. This
data) times the contract’s open interest contract value times the maximum pos- value can be thought of as the turnover
times a factor (usually 1 to 4) for low or sible change in price observed in the last rate of a firm’s shares outstanding.
Trading Liquidity: Futures

Contracts to
Effective
Commodity Futures Exchange % Margin Trade for Equal Relative Contract Liquidity
% Margin
Dollar Profit
S&P 500 E-Mini (Dec ’20) CME 7.4 19.1 3 ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••>>>
Ultra T-Bond (Dec ’20) CBOT 5 4.7 1 ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••>>>
10-Year T-Note (Dec ’20) CBOT 1.2 8.1 11 ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••>
5-Year T-Note (Dec ’20) CBOT 0.6 5.2 17 ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••
T-Bond (Dec ’20) CBOT 3 13.8 6 ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••
Russell 2000 E-Mini (Dec ’20) CME 4 8.6 3 ••••••••••••••••••••••••••••••••••••••••••••••••••••
Crude Oil WTI (Jan ’21) NYMEX 12.3 6.3 3 ••••••••••••••••••••••••••••••••••••••••••••••••
Ultra 10-Year T-Note (Dec ’20) CBOT 1.7 8.1 7 ••••••••••••••••••••••••••••••••••••••••••••
Nasdaq 100 E-Mini (Dec ’20) CME 7.9 15.4 2 ••••••••••••••••••••••••••••••••••••••••••
2-Year T-Note (Dec ’20) CBOT 0.2 3.4 22 •••••••••••••••••••••••••••••
Gold (Dec ’20) COMEX 6.8 17.8 3 •••••••••••••••••••
Soybean (Jan ’21) CBOT 1.7 4.9 6 ••••••••••••••••
Euro FX (Dec ’20) CME 1.9 18.8 15 •••••••••••
Eurodollar (Dec ’20) CME 0.1 3.8 36 ••••••••
S&P 500 VIX (Dec ’20) CFE 56.2 24.4 4 ••••••••
Corn (Mar ’21) CBOT 4.4 14.6 36 •••••••
Natural Gas (Jan ’21) NYMEX 12.5 16.1 11 •••••••
Soybean Meal (Jan ’21) CBOT 0.7 2.3 3 •••••••
Dow Futures Mini (Dec ’20) CBOT 7.2 18.8 4 ••••••
Gasoline RBOB (Jan ’21) NYMEX 10 10.6 5 •••••
ULSD NY Harbor (Jan ’21) NYMEX 8.1 9 5 •••••
Silver (Dec ’20) COMEX 13.6 26.4 4 ••••
S&P Midcap E-Mini (Dec ’20) CME 6.9 15.1 2 •••
Sugar #11 (Mar ’21) ICE/US 6.1 15.2 34 •••
Australian Dollar (Dec ’20) CME 2.7 11.1 13 ••
British Pound (Dec ’20) CME 4 28.4 20 ••
High Grade Copper (Dec ’20) COMEX 5.6 14.4 7 ••
Japanese Yen (Dec ’20) CME 3.3 35.3 21 ••
Wheat (Mar ’21) CBOT 5 14.2 22 ••
30-Day Fed Funds (Jan ’21) CBOT 0.1 2.8 24 •
Canadian Dollar (Dec ’20) CME 2.1 19.3 28 •
Cocoa (Mar ’21) ICE/US 13.1 39.3 26 • CBOT Chicago Board of Trade, Division of CME
Coffee (Mar ’21) ICE/US 10.1 36.8 19 • CFE CBOE Futures Exchange
Cotton #2 (Mar ’21) ICE/US 8 23.7 19 • CME Chicago Mercantile Exchange
Hard Red Wheat (Mar ’21) KCBT 5.3 15 24 • COMEX Commodity Exchange, Inc. CME Group
Lean Hogs (Feb ’21) CME 12 27.6 21 • ICE-EU Intercontinental Exchange-Futures - Europe
Live Cattle (Feb ’21) CME 4.5 17 20 • ICE-US Intercontinental Exchange-Futures - US
Mexican Peso (Dec ’20) CME 8 34.3 40 • KCBT Kansas City Board of Trade
New Zealand Dollar (Dec ’20) CME 2.7 12.6 16 • MGEX Minneapolis Grain Exchange
Platinum (Jan ’21) NYMEX 8.1 19.5 12 • NYMEX New York Mercantile Exchange

Bitcoin CME Futures (Nov ’20) CME 35.2 42.3 3
2101
Brazilian Real (Dec ’20) CME 8.9 12.2 17
Trading Liquidity: Futures is a reference chart for speculators. It compares markets “Relative Contract Liquidity” places commodities in descending order according to
according to their per-contract potential for profit and how easily contracts can be bought how easily all of their contracts can be traded. Commodities at the top of the list are easi-
or sold (i.e., trading liquidity). Each is a proportional measure and is meaningful only est to buy and sell; commodities at the bottom of the list are the most difficult. “Relative
when compared to others in the same column. Contract Liquidity” is the number of contracts to trade times total open interest times a
The number in the “Contracts to Trade for Equal Dollar Profit” column shows how volume factor, which is the greater of:
many contracts of one commodity must be traded to obtain the same potential return In volume
as another commodity. Contracts to Trade = (Tick $ value) x (3-year Maximum Price 1 or exp –2
In 5000
Excursion).

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The information in Traders’ Resource is the most accurate at the time of posting and is subject to change. Because the vendors posting to Traders’ Resource are responsible for their own listing, Technical Analysis, Inc. declines any and all
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Trading Perspectives
SOME PERSPECTIVES ON THE EQUITIES WORLD
Rob Friesen is a professional trader and president & COO of Bright Trading (www.
stocktrading.com), a proprietary trading firm hosting independent trader/members, an
online trading school, and utilizing the StockOdds database (www.mystockodds.com).
Courses on advanced hedged trading and basket trading are offered at www.hedgedtrad-
ing.com. This column shares his thoughts and outlooks on trading, locating opportunity,
probabilistic outcome, and maintaining perspective throughout industry changes. He
can be reached at robfriesen@brighttrading.pro or via www.stocktrading.com.
Rob Friesen
BASKET TRADING: A LOW-VARIANCE long or short, or inverse, positions. makes them “tick.”
APPROACH TO SCALING UP YOUR The objective of basket trading is to Index arbitrage is one form of basket
TRADING BUSINESS get the greatest return on capital (ROC) trading, by using stocks against futures,
Markets won’t always go up. during your designated timeframes, but there are many ways to harvest
Besides the directional outcomes, there but it must be on a risk-adjusted basis anomalies staying within equity instru-
are also many inside days and choppy as well. ments only.
sessions to endure or to participate in, A basket can be as simple as three When comparing the DJIA with the
if you have the knowhow and the tools. stocks, or it can be a large group of S&P 500 (SPX), the DJIA closely tracks
In my work, my goal is not only to assist hundreds of symbols. As with any di- the SPX over the long sample, showing
traders with naked single-stock trading, versification, the number of instruments that the benefits of 30 symbols rivals that
but also encourage traders to explore deployed may have a diminishing effect of 500. I am not suggesting that you have
any additional strategies, methods, and on the benefit of diversification at some to construct baskets of hundreds of differ-
techniques, so that they can broaden point. It’s been debated as to what the ent stocks (although some traders do), but
their toolchest. optimal number of instruments should just that grouping stocks “normalizes”
As I’ve discussed before in this col- be, but historically, an amount on the outcomes, and provides that balance
umn, basket trading is one of the methods order of 20 to 30 different instruments in contrast to the selection of a single
traders can employ to go beyond naked has been regarded as an approximate stock. ETFs are statistically muted, as
stock trading. Both basket trading and level of diversification for a portfolio. they are comprised of several symbols,
hedged trading in general offer many but again, take some time to research
benefits for career-minded traders. Most and understand the composition.
don’t go back to naked trading once
Baskets can be Most investors are already familiar
they’ve learned to incorporate hedges. deployed and hedged with having a basket of stocks, which
Basket trading is essentially trading with ETFs or they can they regard as their portfolio. This goal
a group of stocks simultaneously to be traded against other of having a portfolio is usually to select
potentially reduce the risk and lower a group of noncorrelated stocks from
the variance of the total capital that is
baskets to further multiple industries and sectors. The
utilized, whether that capital is your own reduce risk. purpose is to smooth out the returns and
or whether you are using leverage. If you benefit from the overall performance of
are leveraged, it’s even more important The Dow Jones Industrial Average the group. Stock-specific news, earnings,
to lower the risk per idea, as well as your (DJIA) is comprised of 30 stocks which and events will not make or break the
total exposure to the market. do change from time to time as we saw entire portfolio. We do find though that
Baskets can be deployed and hedged with the changes this past August. It is in significant market moves, the cor-
with ETFs or they can be traded against weighted by stock price, so when AAPL relations increase as the market begins
other baskets to further reduce risk. had a 4:1 split, the index was rebalanced to act as one. During the market crash
Spreading capital over many instruments with other symbols. Apple dropped from in March 2020, most equity portfolios
along with a variety of strategies em- the most heavily weighted stock of the were seriously declining.
ployed can increase your staying power 30 stocks in the DJIA to 17th place. Index The trading of baskets is similar, but
by reducing noise, buying you more time, managers replaced XOM, PFE, and RTX with shortened timeframes. In addition,
and ultimately, these factors can increase with CRM, AMGN, and HON. most investors don’t have hedges on, nor
the probability of success. You can see from this how meaning- are short, but rather they are striving
I’ll reflect for a moment on probability. ful it is to have knowledge about what to diversify and reduce correlations. A
I’m not talking about hedging trades as symbols push and pull at the index and basket trader could have exploited the
an afterthought or done simply because at its tracking ETFs. (ETFs that track market correction rather than be a pas-
you read that hedging is a good idea, but indexes include the DIA and SPY). If sive victim of it.
rather because you are acting intention- you are going to trade ETFs, you should A basket within the same sector or
ally and with analytics to support any understand their composition and what same industry can allow a trader to
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Trading Perspectives
take advantage of macro fine. Other reports offered
influences, technical, and include streaks, RSI-2
relative strength observa- period, price performance,
tions, while reducing the and a seasonality almanac
impact of adversity from (a sample report is shown
a single stock or its lack in Figure 2). With this,
of performance. It is fairly the user can dial in the
hard to pick one stock out seasonal signals as well
of 500 to earn a living on, as price, volume, events,
versus having a probabi- stocks, or ETFs.
listic approach to picking Additional diversifica-
25 longs and 25 shorts tion can come from trad-
and earning your keep on ing various strategies, and
the relative performance trading over a variety of
between long and short timeframes.
dollars. Many market partici-
If you want to reduce pants can gain a false
FIGURE 1: SAMPLE REPORT FROM WWW.HEDGEDTRADING.COM
market and macro influ- sense of security through
ences simultaneously, then outsized returns in a
going long a few symbols momentum market. The
in a peer group and short goal of career traders is to
a few symbols in the same look at the long sample of
group is one approach. The what works in all markets
idea is to have favorable and most of the time,
odds for each long selec- while protecting their
tion (meaning, likely to capital and reducing risk
move up), and favorable of ruin.
odds for each short selec- There are a variety of
tion (meaning likely to methods to position-size
move down). And if this your baskets, and traders
could be made compound- usually start with capital-
able day after day, then balancing long dollars
this is not only a good against short dollars. This
starting point but also doesn’t account for the
one stepping-stone on a instruments’ volatility, so
path to a scalable potential FIGURE 2: SEASONALITY ALMANAC traders can use ATR (av-
trading career. erage true range) or ATR
I’ll illustrate how we approach this. could try to select some long ideas and as a percentage of price, or a blend of
Figure 1 shows an example report from some short ideas that all have favor- beta and historical volatility. Regardless
our dashboard, which is a free resource able odds of moving up or down. If the of your chosen method, the key is to
we offer at www.hedgedtrading.com. SYMBOL/SPY relationship moves up, use a systematic approach so that you
With this information, we are seeking that means the symbol would outperform don’t have the problem of a loss on one
to gain insights into the performance the SPY on a relative basis. Since the symbol that wipes out the gains from
of each symbol in the S&P 500 index common symbol is the SPY that every ten symbols.
against the tracking ETF itself. other symbol is also ratioed with, and On the subject of executing the bas-
The dashboard works by analyzing that relationship has had the event (of kets, various platforms have the ability
signals generated and reporting the the percent penetration of the Bollinger to perform a wave, or you could buy at
subsequent average performance. In this Bands), then you could drop the SPY the open using market or limit orders
example, the widely used %B indicator from the equation and go long some (we prefer limit orders, but that might
is shown and reports the subsequent symbols against short some symbols. mean you miss some trades). If you
average performance for the 10 days The SPY could be utilized for any buy during the day, you must account
after the signal was generated for all the capital-balancing offset or for protection for slippage. You also need to account
same events or signals in the lookback against drift, and to use only when valid for hedging all at once versus hedging
period. Other reports on the website show and with defined parameters. in increments. More on this subject in
three-day performance. Some traders will simply trade a sym- a future issue!
Using this type of information, you bol against the SPY, which is perfectly
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The following selection of book descriptions represents a sampling of recent tween 2010 and 2020, leading fund manager
book releases in the investing field. Books described here may be from some of Terry Smith delights in debunking the many
the major book publishers as well as some independent book publishers. These myths of investing—and making the case for
are not critical reviews or editorial evaluations, but rather a brief look at the book simply buying the best companies.
marketplace to help keep readers up to date on new or recent book offerings. Smith not only reveals what these high-
quality companies really look like and where
Unknown Market How I Invest My to find them, but also why you should avoid
Wizards: The Best Money: Finance Ex- companies that abuse the English language;
Traders You've perts Reveal How how most share buybacks actually destroy
Never Heard Of They Save, Spend, value; what investors can learn from the Tour
(376 pages, £30 And Invest (192 de France; why ETFs are much riskier than
for hardback, £15 pages, £18.99 for most realize; how ESG investors often end
for eBook, Novem- paperback, £14.49 up with investments that are far from green
ber 2020, ISBN for eBook, Novem- or ethical; his ten golden rules for investment,
9780857198693– ber 2020, ISBN and much, much more.
9780857198709) 9780857198082 – The result is an enjoyable and eye-opening
by Jack D. Schwa- 978 0 8 5719 8 0 9 9) tour through some of the most important
ger, published by Harriman-House. Unknown by Joshua Brown and Brian Portnoy, topics in the world of investing—as well as
Market Wizards continues in the three- published by Harriman-House. The world a collection of practical insights on how to
decade tradition of the hugely popular Market of investing normally sees experts telling make your money work for you.
Wizards series, interviewing exceptionally us the ‘right’ way to manage our money. Harriman-house.com
successful traders to learn how they achieved But how often do these experts pull back
their extraordinary performance results. the curtain and tell us how they invest their The VIX Trader’s
The twist in Unknown Market Wizards own money? How I Invest My Money seeks Handbook: The
is that the featured traders are individu- to do just that. History, Patterns,
als trading their own accounts. They are In this collection, 25 financial experts And Strategies
unknown to the investment world. Despite share how they navigate markets with their Eve ry Vo l a t i l -
their anonymity, these traders have achieved own capital. In this honest rendering of how ity Trader Needs
performance records that rival, if not surpass, they invest, save, spend, give, and borrow, To Know (206
the best professional managers. this group of portfolio managers, financial pages, £50 for
Some of the stories include a trader who advisors, venture capitalists and other ex- hardback, £37.50
turned an initial account of $2,500 into $50 perts detail the ‘how’ and the ‘why’ of their for eBook, Octo-
million; a trader who achieved an average investments. They share stories about their ber 2020, ISBN
annual return of 337% over a 13-year period; childhood, their families, the struggles they 9780857197115–9780857197122) by Rus-
a trader who made tens of millions using face and the aspirations they hold. Some- sell Rhoads, published by Harriman-House.
a unique approach that employed neither times raw, always revealing, these stories Russell Rhoads is an expert on VIX, the Cboe
fundamental nor technical analysis, and detail the indelible relationship between our Volatility Index. He takes a deep dive into
a promising junior tennis player in the UK money and our values. all things associated with volatility indexes
who abandoned his quest for a professional Harriman-house.com and related trading vehicles, beginning
sporting career for trading and generated with an explanation of what VIX is, how it
a nine-year track record with an average Investing For is calculated, and why it behaves the way
annual return just under 300%. Growth: How To it does in various market environments. It
World-renowned author and trading expert Make Money By also explains the various methods of getting
Jack D. Schwager is the guide. His trade- Only Buying The exposure to volatility through listed markets.
mark knowledgeable and sensitive interview Best Companies The focus then moves on to demonstrate how
style encourages the Wizards to reveal the In The World—An traders take advantage of various scenarios
fascinating details of their training, experi- Anthology Of In- using futures, options, or exchange-traded
ence, tactics, strategies, and their best and vestment Writing, products (ETPs) linked to the performance
worst trades. There are dashes of humour 2010–20 (320 pages, of VIX.
and revelations about the human side of £24.99 for hardback, Finally, a review is presented of volatility
trading throughout. £18.99 for eBook, October 2020, ISBN events that shook the markets, including the
The result is an engrossing new col- 9780857199010–9780857199027) by Terry 1987 crash, Great Financial Crisis, 2010 flash
lection of trading wisdom, brimming with Smith, published by Harriman-House. Some crash, and the 2020 pandemic.
insights that can help all traders improve people love to make successful investing Harriman-house.com
their outcomes. seem more complicated than it really is. In this
Harriman-house.com anthology of essays and letters written be-
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THE TRADERS’ MAGAZINE SINCE 1982

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ETF MIDCAP GROWTH

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January 2021 • Technical Analysis of Stocks & Commodities • 7

With (And Without) A Trend Filter

Patterns can range from simple to complex. The The test

following patterns: sample that includes a wide variety of trends, price

open up or down $1.00 to qualify. That turns out to be about

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16 • January 2021 • Technical Analysis of Stocks & Commodities

DAVEY To further confuse the issue, not all

Semi-Annual Gold Momentum

DATA FROM THOMSON REUTERS DATASTREAM

Managing Trading Fear

The biology of fear

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ETF Midcap Growth Investing

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January 2021 • Technical Analysis of Stocks & Commodities • 25

A Quick Look At Approaching

Inverted cup with handle: Candles

Measured downward movement:

30 • January 2021 • Technical Analysis of Stocks & Commodities

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34 • January 2021 • Technical Analysis of Stocks & Commodities

METGHALCHI & BAIG/GOLD

38 • January 2021 • Technical Analysis of Stocks & Commodities

MASONSON/WHY TRADE ETFS?

• The trade will make money if the un-

• You are trading two options and you

40 • January 2021 • Technical Analysis of Stocks & Commodities

short the former and long the latter,

Note that greek values are not static

January 2021 • Technical Analysis of Stocks & Commodities • 43

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