On CSI Seasonal Charts by ghsi90336

VIEWS: 11 PAGES: 5

									    VolumeVII, Number3                                  March1991                                                    $r0.00

       BankingOn CSI Seasonal
                           Charts
                          (A Blueprint Into TheFuture)
       A professional
                    work or writing on     effort,I wanted share ourread-
                                                           to       wittr              Bankins CSIOn
                                                                                       Seasona-l   Charts.............. 1
    commoditytrading is not complete       erssome theresults ourwork on
                                                     of            of
                                                                                       Managing
    without an indepth examination   of                A
                                           seasonals.seasonal     analysis used
                                                                            is         Expecled)-osses      .............
                                                                                                                        2
    seasonalpricebehavior.  Anyagdcul-     with Unfair Advantage helpmea-
                                                                    to                 Do CandlestickCharts
    turai productthat is a candidate
                                   for     surethe tendency a marketto be
                                                               of                      ImproveYour Market
    tradingshouldnot beconsidered  un-     conraseasonal   wherein  oppomrnides Peiformance?..................          3
    less seasonal
        the        pattem thegiven
                            for            for profrtarcmoreevidenl                    The New IRM
    productis reviewed.                       Mostseasonal    analysisconsidered       StudyRave......,,.............. 4
                                                     oncommodity hasbeen
                                                                    data               Perpetual    Contract
                                                     throughthe useof monthly          DathSa1e.........................
                                                                                                                       4
                                                     data.Jusltwelvepointsper          Ask Customer       Service,..   5
                                                     yearis whattheaverage      au-
                                                     thorusuallyprovides the in
                                                     standard  technicalaralysis tery aboutour work, I would like to
                                                     publication.                   saythatI hadaninteresting      conversa-
                                                        We have developed        an tion with a fi:iendwhodisagreed       with
                                                                 251
                                                     annualized tradlng        day thetechnique proposed
                                                                                                    I           beforeactu-
                                                     seasonal  patternfor every ally undetaking the analysis. My
                                                     commodity.It is derived    on friend, a former winner in intema-
                                                     a relativebasisthroughan tional competition of the World
                                                     indexingmethod, it ex- Economistof the Year Award, sug-
                                                                        and
                                                     actly pictureseach com- gested       thatday+o-day     information    was
                                                     modity's annualprice pat- not sufficiently preciseto bother
                                                     tem. I thoughtit would be breaking it down any finer than
                                                     helpfulto reveala CSI sea- monthly. Perhaps           this is why few
                                                     sonalchartfrom amongup examples are available where
                                                     to 40commodities sothat deseasonalizationdoneon a more
                                                                         or                              is
                                                                   to
                                                     wecalculated helpmake        a detailed basis.My friend hasnot yet
                                                          for
                                                     case seasonal     analysis. seenthe rcsultsof our work which
                                                        The methodsused to absolutely          suggests muchgreater
                                                                                                          that
         We know our readersare  patiently           our
                                           compute seasonal       indices involve precision warranted,
                                                                                              is
      waiting for our Unfair Advantage@ a few interesting     calculations  which       Thesecharls were derivedfrom
      sofrwareproject to be completed,and  seemed   quitenormalo us,butwhich three-month-forwad              (#46)Perpetual
i             a
      because studyofseasonalcharacter- we havenot seen       usedelsewhere.                 @
                                                                                 In Contract data which assumes           con-
  vistics is part and parcel to the total  fact,at therisk of introducing mys- tractexpiration the 10thdayof the
                                                                           a                          on
      delivery month. We have shown                 This is only one suggestion offer software           whichwill address    tl
      Chicago     corn (figure 1) in our ex- irmong       many. An analysis sea- abovematter. But tbr now *" ubt
                                                                                  of
      ample. It is unlikely that you will         sonal                  is
                                                       characteristicsanimportant contentto simply suggest there       that
      findamore      comprehensive    seasonal requirement the study of a com- are,in fact, many ways to view the
                                                                in
      chart.CSI's     full data resources  were modity's   pricemovement, there market that are significantly more
                                                                                but
      used develop seasonal
             to           our           indices aremanyothercharacteristics         which powerful than the typical zem-sum
      thatin manycases       reach backbefore should considered
                                                         be                beforea trad- less commissionmethodsfound in
      1950on a historical       basis.           ing decision made. We hopeto technicaltoolkits.
                                                                 is                                         Wehave     saidmany
         It is fafulyobviousfrom thischat,       give our readers    moreinsightinto times that zero-sumproductsare
      that one could have        profitedquite this area subsequent
                                                            in               NewsJour- readilyavailablein the form of low-
      handsomely anticipatingthecorn nals to add to yow generalmarket priced
                      by                                                                         glitzygraphical  public  domain
      market    movement     usingtheseasonal knowledge.                                  tool kits or expensive  real-timesys-
      index as a forecasting       tool. High       In pursuingour policy to help tems. These           products usuallyof-
                                                                                                                  me
      readings the com index andhigh readers
                  in                                      graspfundanrentals trad-of
      readingsin relative corn prices ing thatmakesense, have            we        tended theywill produce   regularnetprofits.
      (April, 1990)    suggested eventual to get ahead ourselves there- Unfortunately,
                                   an                           of             in                         nothingcould befur-
      downturnin pricesof com. Simi- Iease newproducts.We plan to therfrom the tnrthl E
                                                       of
      larly low com index readings          and
      relativelylow corn        price readings
      (Sept., 1990) suggested strong  a
                                                                        Losses
                                                                 Expected
                                                          Managing
      moveup in prices. To profit most              Theidea   forthis briefanicle  comes theprobabilityof loggingapmfit that
      heavily,one shouldhaverotained from our iong term                  loyal customer is outside a breakeven
                                                                                                     of              envelope.-
      long or shortpositionsin the un- Mr. H. Green. Mr. Green                   poseda      A histogram profits andloss\r,
                                                                                                           of
      derlying commodity until a price situationwhereitwouldbeinteresting for a given systemcould appear                        as
      reversal                                                  how
                 signaled positionshould to determine manymarginal
                            the                                                           follows:
      be closed. The corn index was fades one might reasonably                      be
      compiled from data over the 40 - forcedto experience                     a
                                                                        before sub- F   B
      yearspan     from 1949through1989. stantial        profitcoulddevelop       that 0
                                                                                        U
      The corn chart shown in                    would move an account        into a tl
      QuickPlot's@ windowcovers
                       top                  the solidly  acceptable position. c
                                                                     credit
      period April, 1990 through Febru-             Mr. Greensaidhe wasaccus-
                                                                                                                  DOTLARS
                                                                                                                  DOLLARS
                                                                                                                        8I
                                                                                                                        O
@indiee+ion                                     tomed+otading
      according thecom seasonal
                   to                     index historicallyhas delivered       407o                                     that
                                                                                              Thearcaof thehistogram is to
      is to favor the long side of com if        profitsagainst   607o losses. we can theleft of thezeropointwouldrepre-
                                                                               If
      you haveremained com's long assume successive
                                on                        that             trades in- sentlosses(60Vo, our example).
                                                                                   are                        for
      sidefrom the September,         1990en- dependent that the
                                                              and            gamehas a Giventhatthesystem       whichproduces
      try. If you areneutralat the present positiveexpected          value,thenwe can the histogramhas a positive math-
      time,theseasonal       indexsuggests   at easily introducesomeprobability ematical                          X
                                                                                                    expectation, couldrepre-
                                                                                                                     "breakeven
      least a month or more wait before generalizations will helpto mea- sentthe dght end of the
                                                                   that
      taking a short position. (Note the surethe likely numberof losses               one envelope", point wherelosses
                                                                                                      the                      are
      indexfromJanuarythruApril,1990.)mustsuffer               before larger
                                                                      a                             by
                                                                               thannor- matched equivalent          profits. The
         Also pleasenotice that the sea- malprofit will occur.                            pointX alsodefines percentage
                                                                                                               the               of
      sonalindex is replicatedyear after            To realistically  zuralyze prob- the total histogram'sarea where
                                                                               dris
      year and the index waveformdoes lem one mustexamine distribu- breakeven
                                                                            the                       resultsare expected.     T(
      not change.                                tion of profits andlosses compute place somenumbers the chartY
                                                                             to                                    on
 --lease assume       that the areaof the
lGhaded portion of the histogram           to
                                                                 ChartsImprove
                                                    Do Candlestick
    be 907oof the total. Therefore,to                Your Market Performance?
    answerour question about the
    number of trials to suffer before               Tradersare always reviewing,                      to
                                                                                            weakness the situationwherethe
                    a
    experiencingsignificantprofit,        we     recalculating,  seeking newindi-
                                                                         out                openandclosearethe same,indi-
                 it
    cananswer by simplyraising.9 to              catorsand new interpretations         of   catingaprobable in themarket.
                                                                                                             turn
    apowerofN where         Nrepresents   the    existing        As
                                                          ones. such, significant
                                                                          a                 These  ninetypesof"PoleLines"are
             of
    number trades should you           expect    amount attention been
                                                          of           has         given    further broken down into other
    to sustain bfore a substantial      profit   recentlyto the Japanese       form of      variationsand are given unique
                                                 charting called       "Candlestick         namesfor easierrecognition. A
    wrll appew99Vo the time.
                         of
             Since.93 is.0097and                 Charts".                                   cenainamount pattemrecogni-
                                                                                                            of
                     .94 is.0108                     Somesources    datethis form of        tion is possiblewhen studyingthe
    whichbounds 1%objective
                     the                 then    chafiingto theJapanese mar-rice
                                                                                              tstl
    a 43 or 44 traderun of breakeven       or    ketinthemid-1700's.     Others  trace       91&15
                                                                                                5
    lessperformance the areabelow
                          in                     its inception theYokohama
                                                               to                   sil-
    X is possible (100-99) the
                      l7o              of        ver marketsof the late 1800's.
                                                                                                                         t3
    time.                                        Howeverit may havegottenits                                             1Z

        Don't be surprised find that,
                                to               staft.it is an interesting ofway                                        00
                                                                                                                         25
    for suchan example,a fairly long             pofiraying  pricemovement. one If                                       2g

    wait could be the norm beforethe             doesnotusea tradingsystem,         but
                                                 reads pricecharts maketrad-
                                                       the             to                                                n
    hoped-for   larseorofit could move                                                                                   ?3

Qou, u..oun,ialance rheblack. into               ing decisions,  Candlestick   Charts                                    22
                                                                                                                         r6
        The aboveassessment         could be     candisclose   information may
                                                                             that                         I
                                                                                                                         t4
    solvedin otherways usingthe full             not be obviouson a standard        bar                                  30
                                                                                                                         24
    capability the binomialdistribu-
                of                               chart. The Candlestick     charts  arc
    tion which is designedto handle              sometimes     drawn with red and
    suchdichotomous          events. I will      blackink with themainbodycon-
                                                                                                                         zs
    leaveit up to thereaderapplyingthe           sistingof thepricemovement         be-
     same principles estimate capi-
                       to           the          tweenthe openand close. The                                             03


    tal necessary suffer throughthe
                     to                          mainbody is thencoloredred or
    losses. couge,lsersofthe Trad-
            Of                                   black depending-otr     whether the
    ing SystemPerformance             Evalua-          is
                                                 close higherthan openthe       (Red)
                                                 or the reverse   (Black). QuickPlot        "PoleLines"in a collective manner.
    torfr, in its employment simula-
                                   of
                            providea quick       uses hollowcandle placeof the
                                                       a                in                  Patterns         "ThreeMountains"
     tion methods,    can                                                                           suchas
     answer this question.
             to                                              for
                                                 redcandle theCandlestick         chats     which traditional methodsidentify
        Incidentally,  ifany otheruser    has    shownthere.Shadow        linesextend       as a "Head and Shoulders",
     anideaheor shewouldlike to have             from themainbodyup and/ordown              "Nabezoko" "Saucer"andmany
                                                                                                         or
     addressed,            jot
                 please it down and              to showthetotaldaily pricemove-            others are recognizedwith similar
     sendit in. We would be happyto              ment.Thereareninedifferenttypes                         to
                                                                                            implications ourwestern     waysof
     considersuggested       topicsin a sub-     orcategories   whicharecalled     "Pole
                                                                                            charting.
                                                 Lines" or daily price movements.
         'H:*"F;;::'r
     sequent  NewsJournal.       E
                                                 Theserangefrom the long red or
                                                                                               Recently lookingoverT-Bond
                                                                                                   we
                                                                                                        in
                                                                                                               to
                                                                                            action, decided analyze       some
t!                                               blacklineswithcharacteristics
                                                 catingexfemesfengthor exffeme
                                                                                    indi-   of thecharting
                                                                                            at a numberof examoles will
                                                                                                                       Looking
                                                                                                           similarities.
                                                                                                                        we
illustrate only one where on
Wednesday marketaction a
             the
"PaperUmbrella" or "Red Lower
                              was
                                       'J :1,'."*:- JlT,lil
                                         *I:::": ;::*: Yp
Shadow"(a long line below the         from satisfiedcustomers   who have        shouldbepleasantly        E
                                                                                                 surprised.
body).Thisindicates youshould
                      that                       the
                                      uncovered manyadvantages         of
be a seller. The  following day we    QuickStudy's@   new Intermarket
hada"Tsutsumi"    where longblack
                         a            RelativeMovementrustudy. All                       Index Data
                                                                                  Seasonal
line engulfed prior daysaction
               the                    callersapparentlyfollowedthe ad-               Now thatwe havedeveloped     the
indicatinganendto therise andthe      viseof theFebruary 1991(Vol Vtr,           Seasonal    Index Data for all com-
startof a fall. This was to be fol-   No. 2) NewsJournal drovethe
                                                          and                    moditie we canoffer it ashistori-
                                                                                          s,
lowed the next day, Friday, by a      studywith 10yearsof weeklyPer-             caldataor asupdates yourdaily
                                                                                                       for
lower openingand a much higher        petualContract data.                       file. If you havean interest please
close" So, the traderwould have          Hereis yourchance introduce
                                                             to                  1etus know so that we canprepare
been                ifhe
     verysurprised or she     were    some id
                                           sol  fundamen research
                                                         tal         into        for an exoeditious  releaseof this
to blindly follow the Candlestick     your analysis. Boot up your new            information.   E
symbols. Every methodsuffersa
failurerateandCandlestick    Charts
areasvulnerableasany othertech-
nicalapproach.
     Reviewing   only a few number
of data points is not adequate   to
drawany firm conclusions.How-                  Regularreaders theCSINewsJoumal
                                                               of                  havebeen leamingmuch
ever,the advantages observed
                        we               abouttheadvantages long-term
                                                               of                              customers
                                                                          marketanalysis.Several
for predictingthe future using           have  approached seeking
                                                          us                 on
                                                                    discounts Perpetual           to
                                                                                       Contractdata help
candlestick  charlsin lieu of stan-      them  getsurted.Theyplanto use         Contract in implement-
                                                                         Perpetual      data
dard price-time charts are not that      ing theideas have
                                                      we      suggested. havebeen
                                                                         We         happyto accommodate
significant. Theyaremoredescrip-         tlese customers discounts, we feel we shouldoffer the same
                                                          with           but
tive of market behavior, but at a        savings to all our subscribers.
price.They usemore space tellto
their story.  and many usersgive                                    Discounts:
themgreat   endorsements.  However                                 Perpetual
                                               20%Discount anylGYear
                                                        on                Contract
if you area good-techdcalatallsl,                                        histo4r
                                                                      Data
your fortunemay not improveby
                                               10o/o     on                 contract
                                                                     Perpetual
                                                   Discount any6-mon!h
spending tirne and money to
           the
switch your system market
                    of       vrew-                                       history
                                                                      Data
ing to Japanese  Candlesticks.E
                                              These prices
                                                    sale       applyto historical             only.Please
                                                                                dataondiskettes
                                         notetharthe20Ea          is
                                                          discount to beappliedto          Contract
                                                                                   Perpetual       series
                                         for whichat leasta ten-year                 T\e
                                                                    historyis ordered. l0vo discount will
                                         applyto PerpetualContractseries whichlessthantenyears moIE
                                                                         for                    but
                                         than6 months historyarcordered.
                                                       of
  Last month our February 1991
                                                  All historical dnta disksare subject to a $50.00 minimum order.
  News Journal, Vol. VII, No. 2
                                                                    This saleendsJune 1, 1991.
  was incorrectly dated as Janu-
  ary 1991.We regretthis mistake.
                     Ask Customer
                                Service                                             macro.WhentheEnterQA#prompt
                                                                                    appears,enter the numberor letter
                                                                                    you namedyour macro. For our
           Eachmonthin this column,the                 is
                                            computer on and at the Quick-
                                                                                    example,we would enter <A> to
      CSICustomer   Servicestaffaddresses   Trieve Main Menu whenthat time
                                                                                    pick upthemostrecent tradingday.
      a subject interest manyusen.
                of        to                comes.
      This monthDave,Karen,Rudi,Su-              With QuickTrieveAutoma-
      san and Tami will answer some         tion, you can update your files
      common questionsabout Quick-          whenever is convenient you.
                                                       it              for                 How canQuickTrieveAu-
      Trieve@  Automation. This macro       Threesimple   keystrokes        the                            weekly
                                                                                           helpwith updating
                                                                                    tomation
                                                                    execute
      feature lets users of QuickTrieve     entireprocess. macrocango on
                                                            A                       andmonthly files?
      version4.0 or 4.01 automate  many     to otherfunction afterdata
                                                            s         retrieval.
      softwarefunctions.
                                                                                              This featurelendsitseHto
                                                                                    QuickTrieve  Automationquite  well.
                                                                                    It lets you automatically updateall
             What types of things can
                                            update
                                                 macro?                             your weekly andmonthly files with
      QuickTrieveAutomation do?                                                     threequick keystrokes.
                                                                                          To make this macro, press
                                                      Start at the QuickTrieve      <ALT> <L> at the QuickTrieve
               QuickTrieve Automation
       can executealmost every normal       MainMenu.Holddownthe<ALT>               Main Menu. At the ENTER QA #
       pro$am function. If you canpress     key while you press<L>. Quick-          prompt, enter the letter or number
                                            Trievewill beready learnamacro.
                                                                 to                 you wish to namethis macro,
    , .he keys to get QuickTrieve to do
    \4omething, thisfeature replicate
                            can             TheENTERQA # promptat thetop                  Proceed         the
                                                                                                  through necessary
       youl keystrokesto repeat the pro-    ofthescreen youname macro.
                                                         lets          this                             the
                                                                                    stepsto condense data. Start
       cess.Somecofirmon   uses are:        Enteranysingle-digit   number any
                                                                            or      with <F> Enter QuickManager    and
          l. Retrteve distribute
                     and            daily   letter. This will be the permanent      <H> Move/Splita DataFile. Select
       updates.                             namefor your macro,soremember           paths moveFROMandTO.Press
                                                                                          to
          2. Automaticallyupdate allyour    it or writeit down! (We'11 this
                                                                         call       <F1> to move all to weekly and
       weeklyand monthlyftles.              sample   macroA.)                       monthly. Answer the next few
          3. Execute series
                     a       oftechnical          Now gothrough process
                                                                    the        of   questionsas they apply to your
      sndies with QuickPlotl QuickStudy.               a
                                            collecting dailyupdate.     Selectthe   needs.Enter<Q> to quit askingif
                                            CURRENT week ard day G (the             you want to changestart and end
                                            rotating  cunentday)whenidenti-         dates.Press key to proceed
                                                                                                 any               and
                                            fying thedatato retrieve.Whenthe        finally, marktheendof yourmacro
               What is the advantaseof              is
                                            update finished,    proceed  through    by pressing  <ALT> <L> again.
      using QuickTrieve Automation for      thedistribution  process. is a good
                                                                      It                  You can use this macro
      retrievingdaily updatesover using     idea to request autocreation
                                                              the              of              you
                                                                                    whenever wantto update        your
      unattended collection?                anyfile typesyou may need.              weekly and monthly files. Press
                                                  After collectionanddistribu-      <ALT> <P> at the QuickTrieve
                                            tion,marktheendof yourmacro        by   MainMenuto playbackthis      macro,
              Both choices uodate
                           can        the   pressing  <ALT> <L> again.              beingsureto enterthecorrectQA #
      most recent trading day with little         The next time you want to         for this setof keystrokes.
             yoTpp.
      efforl-on                             collect a daily update,   hold down           Next Month watch for an ar-
,                         .
                      retrievalwill pick    <ALT> andpress
\-        Unattended                                           <P>.QuickTrieve      ticle on technical analysis with
      up data at a specified time if your   will be ready to play back your         QuickTrieve Automation.!

								
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