Trading Software and Books Reviews

Mid-Level Pullbacks

Combine Price and Time

Ideally we want to combine price and time with our pullbacks. What does this mean? It means we want to see the pullback occur over a period of time (not one day), and we want to see the pullback be at least 3-5% from its highs.

The further the pullback, the greater the returns have been in testing going back to 1995.

Finding Mid-Level Pullbacks

1. Look for stocks which dropped at least 5% from their highs over the past 3-5 days. These stocks will potentially be setting themselves up for a rally. In fact, approximately 66% of these stocks have closed higher when you use a 10-day moving average exit, when they were above their 200-day MA.

2. Now, let’s look to increase the edges even further. How do we do this? By waiting for these stocks to pull back even further intra-day. For example last week we looked at stocks which were above their 200-day MA, when they had certain liquidity requirements and were at 10-days lows. As we saw the results were as follows:

Limit Order Entries

Now let’s look what happens if we wait for these stocks to pull back even further intra-day and we buy them on a limit 5% below yesterdays close. As you can see, the results improve, and we’re now trading higher quality pullbacks.

Here are the results of a 10-day low, buying on a limit order 5% lower the next day. Exit on a close above the 10-day MA.

Higher Quality Trades

By waiting for the pullback to become deeper, you see that there are fewer trades. But the quality of these trades improves by a healthy amount. The % correct stays the same, but the average gain per trade nearly doubles.

Here is an example of a mid-level pullback which was able to capture a healthy gain over a few trading days:

Trading Markets

Shallow Pullbacks

Identifying Good Pullbacks

First, we want a stock to be above its 200-day moving average before we buy it. Why? Because stocks tend to trade higher more consistently in pullbacks above their 200-day moving average than below it.

We tested a stock’s behavior above and below its 200-day MA looking at over 8.25 million trades from 1995-2006. What we found, is that the average gain for all stocks above their 200-day MA five days later was comfortably ahead of the average gain for all stocks below their 200-day MA when looking ahead five days.

Simply stated, it’s better to be buying stocks above their 200-day MA than below. When stocks break down under their 200-day MA, they often have a tendency to continue dropping.

Catch a Falling Knife?

A good example is Freddie Mac (FRE | charts | news | PowerRating):

As you can see, the stock reached above $60 per share, and after closing under its 200-day MA, it proceeded to collapse into the $20’s. Within a 30 day period of time, the stock lost more than 50% of its value. By staying away from the stock once it broke under its 200-day MA, you would have avoided a great deal of pain and losses that fund managers and investors felt when they bought it much higher, believing it was a cheap stock. In reality, it was a falling knife, and the 200-day MA rule often helps us avoid stocks like these.

Citigroup (C | charts | news | PowerRating) is another example:

10-Day Highs versus Lows

Before looking at the various levels of pullbacks you’ll want to focus on, we’d like to share a research study of ours. The study looked at the average gain per trade for all stocks above their 200-day MA making 10-day highs (breakouts) versus those making 10-day lows (pullbacks). The exit was a close on the opposite side of the 10-day moving average.

The average gain for the stocks making 10-day lows was more than three times greater than the stocks making 10-day highs. This test is one of the strongest pieces of evidence that the short-term edges have been greater when buying a pullback versus buying a breakout.

Three Types of Pullbacks

There are three types of pullbacks we want to focus on. They are shallow pullbacks, mid-level pullbacks and deep pullbacks. Each has its pluses and minuses, and when you blend them together, you have a combination of pullbacks which potentially gives you a healthy trading edge. In this lesson, we’ll look at shallow pullbacks.

Shallow Pullbacks

What is a shallow (or small) pullback? It’s exactly as it sounds. It’s an up-trending stock which pulls back for a few days, before resuming its longer-term up-trend. These types of stocks are usually momentum stocks giving fund investors little opportunity to accumulate the stock at lower levels.

This chart of Freeport-McMoRan Copper & Gold (FCX) is a good example of shallow pullbacks:

10-Day Lows

Now that we have these filters, let’s first look at stocks that closed at a 10-day low. We’ll also need to exit these stocks (there is no more guessing when to exit!), so we’ll exit once the stock closes above its 10-day simple moving average.

A 10-day low is exactly as it sounds. It’s a stock which closes at its lowest price over the past ten trading days (today inclusive). As you can see from these results (Jan 1, 1995 through Sep 30, 2007), these stocks have had an edge.

Stocks which have made 10-day lows using these filters and exits have outperformed the average of all stocks. And they have outperformed 10-day highs by a very healthy margin.

Here are two examples of stocks which made 10-day lows and then rallied to close above their 10-day MA:

As you can see, the stocks pull back to levels which attract buyers, and then resume their moves higher.

Since 1995, if you bought each stock using this criteria, each day at a 10-day low, and exited when it closed that day above it’s 10-day MA, you would have been profitable (before slippage and commission) 69% of the time, and your returns would be more than double versus randomly selecting any stock during this period of time. This is the beginning of you finding trades which have had historical edges.

2-Period RSI

Now, let’s look at stocks which have a 2-period RSI below 5. Before we do that, we want to make sure you understand what a 2-period RSI is.

What is RSI? It’s an oscillator which measures the strength of a stock on a 0 to 100 basis. The stronger the stock has been, the higher the RSI is likely to be. Most charting packages and books look at the 14-period RSI. This is too long for traders (and we can find no statistical evidence that a 14-period RSI has any edge). We use a 2-period RSI, as that is one of the best ways to identify how overbought or oversold a stock is. Ideally we want to focus on stocks whose 2-period RSI is below 5.

When we use our filters and then look at all stocks that have had an RSI below 5, we see edges. For example, from Jan 1995-Sept 30, 2007, buying a stock with an RSI below 5 and exiting on the close when the 2-period RSI closed above 70, you would have been correct 70% of the time (before slippage and commission). And the average gain was 1.69%, approximately three times greater than the average gain for all stocks during that 12 ¾ year period of time. These are healthy edges and it shows you that edges trading edges can be found when using the proper entry and exits.

Here’s an example of a stock with a 2-period RSI below 5 that then traded up and closed with a 2-period RSI above 70:

Trading Markets

Trading Markets Philosophy

Trading Markets Philosophy

The TradingMarkets Philosophy is to buy on weakness and sell into strength. This type of trading is known as swing-trading and pullback trading.

What is a pullback?

It’s simply a stock that has pulled back off its highs and is trading lower than it was a few days ago. Much has been written on this type of trading, as it is very popular. The problem with a great deal of the information that’s out there is that it’s not quantified. Meaning, people will say “buy on a pullback” without exactly defining what that pullback is and what the edge is in buying at that time.

In this course, we’ll define exact pullbacks and discuss the edges for these pullbacks.

The Best Pullbacks

There are three types of pullbacks that you should understand as you are developing this trading approach. As mentioned earlier, they are shallow pullbacks, mid-level pullbacks and deep pullbacks. Each has pluses and minuses to them, and in the next three lessons we will look at them more closely.

In the perfect world, we want to allocate capital to trading all three types of pullbacks, and we want to be able to know what the edge has been in these pullbacks. By “edge” we mean what is the average gain per trade using a specific exit and what percentage of the time it has been correct. There are, of course, no guarantees this is how it will play out in the future, but it gives us a good idea about how these stocks behaved in the past.

Much of our testing is done from a database of over 8.5 million trades going back to 1995. We like to test large amounts of data, as it gives us further confidence that the findings are real. Many times, you’ll see on television or read in a publication that whenever the market has done something in the past, it has risen or dropped a certain amount of time in the future. Unfortunately, the person telling you this will likely be talking about something that happened 5 or 10 times. When you hear this information, it’s probably meaningless. Why? Because there aren’t enough occurrences to be statistically significant – ideally you want to look at events that have occurred hundreds, if not thousands of times. That way you can get a feel of whether the behavior is consistent over a longer period of time.

Edges

We’ll also teach you about edges and the types of edges you should be trying to find.

If you study all stocks traded from 1995 and then look ahead five days, you’ll see that the average gain has been about 0.25% per stock over that period of time. This is our baseline. Can we find stocks that have done better than this?

The answer is yes – all you have to do is look at stocks that closed at a 10-day low and were above their 200-day simple moving average. These stocks have risen more than 2 ½ times greater over five days versus all stocks (on the opposite end of the spectrum are stocks which have made 10-day highs; these stocks have performed worse than the entire universe over the next five days).

What you start to see is that larger edges can be found in stocks that are trading down (pull backs) versus stocks which have shown strength. This has been shown over and over again in our studies going back more than a decade.

The moral of this is that buying pullbacks is a superior trading strategy to buying breakouts, at least over the very short-term.

Exits and Locking in Gains

Entering stocks with edges is important, but just as important is properly exiting a stock. We always want to be selling into strength.

The academic world calls this “reversion to the mean” trading. In other parts of the trading world it’s also know as “feeding the ducks when they are quacking”. A good friend of ours is a former market maker for a major Wall Street firm, and he told us he made the most money “feeding the ducks when they are quacking”.

As you will learn, when a stock is rallying, the ducks are usually quacking, that’s the time to be selling your positions and many times locking in your gains. We’ll look at optimal selling points, including using the 5-period simple moving average, along with looking at the 2-period RSI as systematic exit points. Each offer significant edges versus guessing when to exit a position.

By the time you’re done with this course, the guesswork should no longer exist for when to lock in gains.

Protecting Your Edges

We’ll also discuss how to lessen our risk when trading. We’ll look at hedging from market risk and ways to lessen sector and corporate risk. The more we can protect ourselves from this risk, the greater our chances for success become.

Trading Systematically

The majority of our trading is systematic, meaning there is a specific plan in place, and this plan is executed each day. This means we know which stocks we are going to buy, at what price, what percentage of our portfolio is allocated to these stocks, and where to exit and when to exit. We also have a game plan that looks at market, sector and corporate risk.

This is known as model driven trading. It’s not only the way some of the biggest and best hedge funds and trading firms trade, it’s the way many successful individual traders trade.

In this course, you’ll be able to use this information in any manner you like, including trading with it in a discretionary manner. But, in its truest form you will likely be able to maximize this knowledge in a systematic manner, which allows you to trade only a few minutes a day. You simply get the set-ups for the upcoming day and place your orders with your broker and then you’re done. Not only is this more efficient, it’s also less emotional.

Trading Psychology

We’ll discuss emotion and psychology in the final part of the course. Many books have been written on this topic, and it’s of utmost importance in executing your game plan.

By the time you’ve completed this course, you will understand when to buy a stock, when to exit, how to protect yourself and why it’s important to use the same approach day after day.

Trading Markets

Top Stocks 2005 Review

I think the cover says it all – the “11th Year of Publication”! Top Stocks 2005 is a dead set must have for all share investors. Whether you are new to shares or a veteran of the markets Martin Roth’s guide will pay for itself many times over.

Surveying the Australian sharemarket and deciding where to start can be a daunting task for the new investor. With over 1,500 listed companies the sharemarket can seem an impossible puzzle to solve. With Martin Roth beside you, your task has been greatly simplified, as Top Stocks has distilled the choice from 1,500 listed shares to 115 handpicked companies.

For the experienced investor, who understands the value of independent analysis and precise data, Top Stocks 2005 cuts to the chase with precise company information summarised on a single page.

Martin states that his objective is to make share selection easier. I think he succeeds handsomely. Martin, a Melbourne-based finance journalist, scans the entire ASX list to identify those companies that meet his strict conservative financial criteria. He will identify only those companies that have paid dividends for five continuous years, have a low debt ratio, are well capitalised and have produced a good return on shareholder’s equity. Martin organizes the companies into alphabetical order, making the book easy to refer to. It is full of simple and well-explained facts.

Top Stocks has been successful in previous years in identifying threatened companies, having removed HIH and Onetel when they failed to meet Martin’s strict financial criteria. Wouldn’t it be nice to get a heads-up before one of your shares tanks it! As we know, there are no guarantees in share investing. However, having a copy of Martin Roth’s Top Stocks 2005 on your bedside table will certainly help you sleep more easily.

This article was originally published in the Sep/Oct 07 issue of YourTradingEdge magazine (www.YTEmagazine.com). All rights reserved. © Copyright 2009, MarketSource International Pty Ltd.

Weak Weekly Options

On several occasions, I was asked to share my impression of the weekly options on some major indices, and in this article I shall first define them and then emphasize some of the pros and cons of trading them.

The weekly options were introduced by the CBOE (Chicago Board Options Exchange) at the end of 2005. The core difference between the weekly options and the regular options is the date of expiry. The regular options stop trading at the end of the third Friday of each month, and they expire on the following day Saturday. Unless there is a holiday on the third Friday, in which case they stop trading a day earlier.

However, the weeklies, as they are called, stop trading at the end of Friday of each week.

Usually, their label on an option chain has the name of current month and either Week A or Week One the same current month. For instance, the weeklies for the first week of December shall be listed either as Dec WeekA or simply as DEC1, depending on the different brokerages. The customary set up of the weeklies excludes the Week C, or the third week of the month, due to the fact that the Week C is by its default setting the third week of the month.

The weeklies emerge on the option chain on Friday mornings prior to the opening bell; thus at any given Friday there are two sets of weeklies listed. For example, at the end of the first week of December, there will be the weeklies for Dec WeekA listed with one day left to trade, normally posted as the number of days in parenthesis (1), as well as the weeklies for Dec WeekB with (7) seven calendar days left. There is a big difference between the number of trading days left, and the number of calendar days left. In our example, a trader could sell Dec WeekB (7) on the day they were listed and profit from the option’s premium time decay over the weekend while the markets are closed.

Moreover, the main reason why so many option traders have not encountered the weeklies is that they do not exist on most of the optionable products. In fact the weeklies are being traded only on several major indices. Specifically, the weeklies are listed on the SPX (Standard & Poors 500), OEX (S & P 100), and XEO (European version of S & P 100). A word of caution, the weeklies on the SPX do not stop trading on the Friday of each week but actually at the end of Thursday. However, their settlement price is based on the opening price of the SPX on Friday.

Lastly, an additional difference between the weeklies and the regular options lies in the liquidity. For example, when an option trader places an order to either purchase or sell a call or a put, there are six exchanges competing for the order. Namely, they are the AMEX (American Stock Exchange), NYSE (New York Stock Exchange), CBOE (Chicago Board Options Exchange), BOX (Boston Stock Exchange), ISE (International Securities Exchange), and PHLX (Philadelphia Stock Exchange). In the case of the weeklies, a buying or a selling order goes to a non-competitive environment of the Chicago Board Options Exchange because the weeklies were invented by them and trade on the CBOE exclusively.

Having defined the weeklies, we shall examine some of the more numerous cons of trading weeklies. Normally, the Open Interest and Volume for the individual strike prices on the weeklies is much lower than on the regular options. In the examples below, two weekly options chains were being compared on Thursday morning 11-13-08 prior to the opening bell. The blue lettering (OpInt) stands for Open Interest. In Figure 1, the XEO (European version of S & P 100) shows the highest open interest of 26 on 430 calls for November Week B.

Whereas, in Figure 2, the OEX (American version of S & P 100) has the highest liquidity of 666 on 420 calls, and 675 on 420 puts for the same week. Both products had closed at the same price 411.15 on Wednesday 11-12-08

In short, the lack of liquidity on the weeklies is a major obstacle.

The second disadvantage is due to the limited amount of strike prices that are posted for trading each week. On both the OEX and XEO there were only seven strike prices listed. On both of them the increments are priced in five points which makes it difficult to time a good entry for the spread trades. (On the SPX, the increments are ten points apart. Even those market makers that have worked on the CBOE floor and left it suggest avoiding trading the SPX altogether, weeklies or not.)

An additional nuisance is that the advanced option strategies such as Iron Condors are out of the question due to the limited number of strike prices posted.

Besides the limited amount of strike prices, the spread between the Bid and Ask is huge. Observe in Figure 2 that the calls for 420 are priced at 5.80 Bid and 6.90 Ask which is a dollar ten (1.10). In Figure 1, the spread is even greater for the same 420 call; 5.30 Bid and 7.00 Ask. Hence, the XEO is worse than the OEX.

By contrast, there are very few pros for trading the weeklies. One of them is the “juicy premium.” Certainly, the CBOE had made them attractive in order to catch the attention of the traders to the weeklies. Yet, the fact that they had been around now for almost three years and did not gain popularity which is self-evident in the lack of liquidity as well as the lack of open interest, speaks the multitude about the trading weakness of the weeklies.

Thus in conclusion, the cons of trading the weeklies outweigh the pros. As a final point, I wish to state what I would like to see in the future and what would attract me to them: the greater liquidity (open interest and volume on individual strike prices), more strike prices listed, tighter spreads between the Bid and Ask as well as between the strike prices, and the end of CBOE monopoly of the weeklies.

Josip Causic, Online Trading Academy Options Instructor

Markets and Market Timing

This morning I was listening to a cable news network and in the span of about three minutes, I heard that home foreclosures increased 25%, job losses were on record pace, and Congress was meeting today to figure out where the 700 billion dollar bailout was actually going. This was enough to make your head spin so I turned off the tv.

Homes are being foreclosed at a record pace because people borrowed more than they could afford and lenders lent more than they should have to people who could not afford the loans – this is what happens. This is not news, we were expecting this more than a year ago at Online Trading Academy. People are losing their jobs because people in China and other parts of the world are willing to do the same work an American does for a fraction of the hourly wage – this is what happens in free markets. This is not news, we were talking about this over a year ago at Online Trading Academy. The 700 billion dollar bailout program is not working. The money is going to the corporate elite with no restrictions on what they can do with it. This is not news, in the Extended Learning Track (XLT) Futures and Forex classes that I lead at Online Trading Academy, each time a country announces a bailout, it is a hard and set rule for us to find resistance (supply) and short the stock market either by shorting stocks or the futures.

You have two choices during these challenging times. One is to give in to fear and to take no action, or worse yet, take ill-informed action. It is easy for the government to pass ridiculous bailout packages and hand our hard-earned money over to the corporate elite and special interest groups because they know the public is experiencing extreme fear and will agree to almost anything. Your other choice is to rise above the fear, rise above the risk, observe the reality of what is happening, and understand that with the most challenging times come the most outstanding opportunities. More on this subject later in this piece.

As market speculators, volatility is at record levels and we love this because we are experts at identifying turning points in markets based on the laws of supply and demand. Volatility is tremendous because the distance from our demand (support) levels to our supply (resistance) levels is big, that’s all. When these areas tighten up again, volatility will decrease. Whatever the scenario and whatever markets we speculate in, we always apply the same set of rules.

For stock traders, one of the most important functions of your routine needs to be proper analysis of supply and demand in the S&P and NASDAQ prior to doing any analysis on stocks. Why? Simply because stocks ebb and flow with these broad markets. Thursday of this week in the Extended Learning Track (XLT) Futures class, we used our rule-based supply and demand analysis to attain a very low risk, high reward, and high probability trade that worked out very well. I will explain for your review using some of the rule based information we use each day in the XLT. This opportunity was found in the NASDAQ futures using a very small time frame. Area “A” on the chart shaded in yellow represents an area of supply (resistance). We know this because when price was at area “A”, it could not stay there, forming candle wicks which are the footprints of sellers. Price only declines from “A” because there are more sellers than buyers at area “A”. Another factor that made that level an ideal supply level is that 1175 also happened to be the overnight (globex) high price that morning in the NASDAQ futures. Why was it the high? It was the high because that is where all the supply was. Area “B” represents the first time price revisits supply level “A”. Our rules tell us here that novice, consistent losing traders are buying (at “B”). We know this because these buyers are buying AFTER a period of buying, mistake number 1, and they are buying AT a price level where supply exceeds demand, mistake number 2. The objective laws of supply and demand ensure that the trader who commits these two mistakes will consistently lose. We simply sell short at the lower black line with our protective buy stop just above the upper black line. The lines represent the “supply zone”. As active traders, we determine these zones each day. When we swing trade, we do the same thing in the larger time frames.

Let’s now discuss the key point that made this trading opportunity so high probability. Notice the area shaded gray. It is a strong rally built with NO DEMAND levels during the rally, just nice big green candles. This means that as soon as price reached supply, it was likely to fall very quickly through that gray shaded area. We require strong rallies in price such as this one to our pre-determined supply levels as that increases the odds of our short position working dramatically. In other words, price reached our supply level and we shorted at “B” for a move down to “C” because of the very clear and large PROFIT MARGIN (the gray space).

Some might say that we traded too close to the open of trading and that is risky. This all depends on your definition of risk. Why trade near the open? Because if you really understand how markets work, you know that the largest imbalance of order flow demand and supply is at or near the open of trading in any market which means high probability opportunity. I would much rather take on risk when the odds are stacked in my favor then later in the day when the odds are not that great. In this trade, people who bought from us at “B” fell for the emotion “trap” called “greed”. In the Extended Learning Track (XLT) Futures and Forex program, we don’t fall for those traps, we set them.

For those who only trade stocks, your odds dramatically increase when you time your equity trades with the S&P and NASDAQ. Instead of spending hours scanning through hundreds of stocks for setups when starting your daily analysis routine, spend five minutes creating buy and sell zones in the S&P and/or the NASDAQ markets. Then, trade a handful of stocks at most and TIME long and short positions with the S&P and NASDAQ supply and demand levels.

As for the global bailouts and comical intervention, don’t expect these to have any positive effect on your financial well being. You see, markets do a fine job of making everyone’s lives better in time, if left alone. In a free market with NO bailouts or intervention of any kind, banks and lenders who make bad choices that lead to insolvency simply fail. This removes the bad banks from the system and we are left with quality banks that don’t make these same bad choices and this outcome is good for all. In other words, the strongest foundations have no cracks, they are strong and solid. Banks that would otherwise be insolvent due to bad business practices are kept in the system with bailouts. These bad banks are cracks in the foundation of our economy. When a government saves a bank with our tax dollars, it does not make the bank better. Instead, it ensures the crack in the foundation of our economy will remain, until it is removed. If you reward a thief for stealing, the thief will steal again. If you reward a child for bad behavior, they continue to behave poorly. When governments attempt to intervene with bailouts and other forms of intervention, this futile action ensures that cracks in the foundation of our economy will not only remain but get worse.

Free markets naturally force change. They force cheaters to be honest, they force market prices to be at levels that are acceptable for all willing and able workers and producers, they reward the educated with direct deposits from the uneducated which forces education on those who wish to survive. When left completely alone, free markets create a wonderful economy and life for all. It’s really natural selection at its finest. When governments stop intervening to save those who would otherwise fail and begin to dramatically reduce taxes world-wide, expect the markets to begin to recover nicely.

Hope this piece was helpful. Send comments and questions. Have a nice day.

Sam Seiden, Online Trading Academy Instructor

How to beat the Managed Funds by 20% Review

The title might lead you to think that this is a book about using managed funds to do better than fund managers do, but it is much more than that. It is a guide both to designing portfolios, and to selecting the strategies and tactics to use within those portfolios.

People with knowledge of the markets may, like me, feel that this task is impossible to fully explore in 169 pages. But as a broad map showing the paths that need to be taken, the book is excellent. It is easy to read, not overly technical, and is full of well-explained diagrams. Its clear layout leads the reader’s thinking through key areas that need to be explored if consistent success is to be achieved.

If you are new to trading, think of this book as a good foundation on which you can build your personal wealth-creation strategies. If you are more experienced, think of this book as a keystone – the stone at the top of an arch that holds all the other stones in place.

However, readers must also realise that the book is only laying a foundation of process and procedure based on the psychology, values and beliefs of the author. While these are quite sound, they will seem too conservative to some and to others too risky. But after this journey through the author’s logical presentation, readers will be much wiser and much more aware as a result of the time they have invested in the book – provided they do the necessary home work.

Dale Gillham does a good job of looking at the myths that have caused many people to come unstuck. After clarifying concepts he builds a solid case, based on sound reasoning supported by evidence, for the reader to consider using his approach.

This article was originally published in the Sep/Oct 07 issue of YourTradingEdge magazine (www.YTEmagazine.com). All rights reserved. © Copyright 2009, MarketSource International Pty Ltd.

The Psychology of Electronic Trading Review

This book is not, as some have thought, about electronic day trading. It is about the paradigm shift towards electronic trading that has been taking place around the world over the past decade. In many ways this is a complementary book to Patrick Young’s Capital Market Revolution, which explored the industry’s transition to electronic trading.

While a most interesting read, the book’s style is that of a textbook on the psychology driving the changes, and on the primary and secondary effects this has on the trader. For example, while the electronic medium may allow, on the one hand, for Young’s transparency, liquidity and accessibility within the markets, it also provides opportunities for gamblers to lose large sums of money. Seeto devotes a considerable amount of time to examining gambling attitudes to trading, as well as the ease and subsequent danger and impact of over-trading.

The purpose of the book is to discuss, in an informative and enlightening way, the challenges and bonuses in trading the markets electronically. The author, an experienced institutional trader and private client adviser, then walks the reader through processes and procedures to take advantage of this ever-improving trading environment. At the same time he cautions about the challenges of over-trading and the increased challenges provided by the availability of information.

The depth to which this book explores its subject and its textbook style will not appeal to everyone. However, time taken to explore the ideas will be a worthwhile investment. For some, it may prove to be a most profitable investment.

This article was originally published in the Sep/Oct 07 issue of YourTradingEdge magazine (www.YTEmagazine.com). All rights reserved. © Copyright 2009, MarketSource International Pty Ltd.

The Bourse Review

Trader One

The Bourse is user friendly. The installation process is simple and the beginner’s tutorial is comprehensive and concise.

The standard screen arrangement contains the stock list, and the other two screens contain the market depth and the chart relating to the selected stock, option, warrant or futures contract. The software has a sizeable choice of technical analysis tools. I found them very simple to apply to the charts. I was able to perform all the usual tasks, such as saving my drawings and altering the indicator parameters to my preference.

Creating my own ‘chart styles’ or mix of indicators and then applying them to all charts was very simple. Adjusting the layout was also simple and flicking between full screens was the only task that posed more of a challenge (a second look at the tutorial solved this).

The user can choose between live, snapshot or delayed data depending on needs and budget (rates are available on the web site). Some news reports are free with a 20-minute delay, or available from other commercial providers at a cost per item. Although I lean heavily toward charting as my method of analysis, the information for fundamental analysis appears more comprehensive than I have encountered on other software. There is a handy search function that allows the user to search by symbol or name. I also enjoyed the Google-like search function that can search for keywords in both the text body and in headlines of news reports.

The best features of The Bourse software are its simplicity and practicality. The fact that the program was so user friendly meant that I could immediately start focusing on what the stock was doing instead of working out how to master and tweak the program.

Trader Two

The ‘Getting Started Tutorial’ was an excellent introduction to The Bourse – concise, clear and comprehensive. By running the tutorial on my laptop while following the instructions on my PC I was able to gain, in one run through, a good understanding of the program’s capabilities.

The Bourse offers a pane layout, and users have the choice of fixed panes or multiple document interface. I found each had advantages, and one might use several different layouts for different purposes. My initial task was to set up a customised layout with a watch list and chart, and then populate a watch list; all of which was achieved with minimum confusion. The panes are synchronised so that the data simultaneously change in all of them as you flick through the watch list. The screen is clear and uncluttered.

There is an impressive array of indicators and drawing tools to satisfy even the most avid technical analyst, and I had a lot of fun playing with the different chart options. Defaults are determined by the user. It is then a simple matter to select different styles from the built-in list, or to create and save your own, using combinations of favourite indicators. One thing I did find disconcerting was the need to elect to save all lines drawn on the chart. I would rather have to elect to remove them.

Easy customisation is found throughout the program.

Information needed by options and warrants traders is available, plus a wealth of detail on company profiles, past dividend and trading history; useful internet links, and an excellent search feature.

A user-friendly platform, ease of access and customisation are the buzz words here, and given that it is not at the top end of the trading software price range, this bundle of features makes The Bourse a very appealing package.

Trader Three

The Bourse is a software solution for traders at all levels. It is a highly customisable, very smooth system to co-ordinate information viewing, charting, and reception of trading alerts.

The Bourse has all the features an experienced trader requires, but is also very friendly to newcomers – an extensive and comprehensive integrated manual is supplied, augmented by a very fluid and helpful video tutorial or even a short face-to-face instruction course if desired.

The Bourse’s greatest strength is its ‘customisability’. Virtually every element in the program is adjustable; furthermore, there is the option of synchronising a number of information windows (for example, market depth, a chart, and perhaps a news breakdown) with a selected symbol – changing symbols in a particular window changes them all.

The integrated charting system is comprehensive, allowing good flexibility in the application of a wide variety of standard charting tools. Charts can be saved and exported, and it is possible to save favoured chart templates and apply them to any chart as desired.

The Bourse offers streaming news and easy access to news related to specific symbols and their associated company or companies, currency, or commodity. The Bourse Data also offers access to its Bourse Research service, which gives easy access to every relevant piece of information about a company – it is also possible to search this database by criteria, allowing a user to quickly find stocks that fit a trading strategy.

The Bourse also offers an ‘e-lert’ service, sending you alert SMS messages based on a condition you set and ensuring you’re never isolated from their service.

In my view the Bourse is a user-friendly and comprehensive software platform for information management and data analysis, which will undoubtedly prove useful to many traders of all levels. If you’re in the market for a software package to enhance your trading, be sure to give The Bourse a whirl.

Bourse Data Response

Many people claim that their software will (almost) do the trading for you. However, we know that great traders are not successful because of the software they use. They have rules to guide their trading, and they seek out software that is comprehensive, flexible and easy to use to support those rules.

Our ongoing goal for The Bourse is to support you in making trading decisions confidently and effectively.

To that end, we understand that you need more than just pricing data or scanning tools. You need to know when a stock is going ex-dividend, or when a sensitive report has been released. Thus, the Bourse combines your choice of delayed or live ASX and SFE market data with:

• easy to use and comprehensive charts

• access to SMS alert services

• a portfolio system

• full financial information for every company traded on the ASX

• access to market scanning technology

• international pricing data (including currencies)

• access to a multi-broker trading platform

• customisable screens and layouts

• live AAP/RWE news and company announcements.

Our service includes full telephone support – so you never need to be caught out trying to remember how to use a feature of the program. We enjoy talking with our customers, and many of our best ideas have originated from customer suggestions.

Bourse Data also offers comprehensive trader education. This is focussed on setting up rules so that you can have consistent results without the fear of losing control.

Finally, we understand the importance of saving money. Our intra-day subscription data plans are more comprehensive and better value than most end-of-day data plans. Our education courses have been rated as superb value by nearly all attendees.

This article was originally published in the Sep/Oct 07 issue of YourTradingEdge magazine (www.YTEmagazine.com). All rights reserved. © Copyright 2009, MarketSource International Pty Ltd.

The Right Stock at the Right Time

Anything written by Larry Williams is worth at least a bit of a read. He is the one who wrote a book about how, in a trading competition, he made $1 million from $10,000. On the way to the million dollars he went through $2.2 million, meaning that at one stage he lost half his trading account.

Larry is an experienced professional trader who has made millions in the markets. He is a fund manager and, some think, a bit of a cowboy. I find it interesting that while many authors, in this bear market world, are writing about bear market strategies, Williams has lifted his gaze to a broader approach by drawing on his four decades of experience. The book is a course in his ideas and approaches to trading a variety of international markets. Where possible he likes to trade over longer time periods, considering various cycles, including seasonal changes.

If you are looking only at the Australian stock market, you may feel that many of his ideas are not relevant to your situation. I would suggest that they probably are relevant, once you have done some work to make them so. The real challenge is for readers to take the ideas and turn them into practices and procedures in the markets they trade.

Over the years Larry Williams has been responsible for the development of a number of indicators that are in common use and available on most software packages. Some of them are explored in the book.

The book is easy to read and the concepts easy to follow.

This article was originally published in the Sep/Oct 07 issue of YourTradingEdge magazine (www.YTEmagazine.com). All rights reserved. © Copyright 2009, MarketSource International Pty Ltd.