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Analysis Concepts

Analysis Concepts

Each issue of this publication focuses on a technical or fundamental analysis concept. The idea is explained and demonstrated, and each issue is loaded with graphics that help tell its story. In addition, each issue of Analysis Concepts is usually accompanied by workspaces, EasyLanguage, data and other files that you can download and use immediately on your own computer.

View a list of all Analysis Concepts papers 

Custom Historical Beta with Beta Drift

Date: 9/10/2014

Beta is a widely used metric in finance, with many applications in trading and investing. This paper introduces a custom indicator to calculate historical beta values for stocks. Read More

Real Body: The Other Net Change

Date: 7/9/2014

Since their introduction to the Western world by Steven Nison and others in the last several decades, candlestick charts have become so popular that they are now commonplace. This style of charting uses the same data points as conventional bar charts but emphasizes the relationship of the open and close within each bar.

Read More

Boosting the RSI with the Modified Inverse Fisher Transform (MIFT) - Part 2

Date: 5/14/2014

As discussed in Part 1 of the series, upside price action can be quite different from what is experienced to the downside. Adjusting the distribution of the Relative Strength Index (RSI) indicator using the Modified Inverse Fisher Transform (MIFT) helps to account for those differences and provides new trading applications. Read More

Monitoring the Action Inside the Bars

Date: 3/12/2014

Three Analysis Techniques are presented here that explore this area. Each is an attempt to see and understand more about the bars or candles than initially meets the eye. Specifically, two of them look at the activity in each bar that is above or below a benchmark price, and the third is a measure of the pace of the activity in each bar. Read More

FX Volatility Part 3 - Introducing the Volatility Cloud Strategy

Date: 1/8/2014

As discussed in Parts 1 and 2 of this series, 24-hour maps of forex volatility can be exploited to gauge potential amplitudes of hourly price movements. Strategies to take advantage of these volatility patterns can also be developed from the same concepts. This paper will introduce the TSL: Volatility Cloud custom strategy with detailed description and analysis, as well as a modified version of the Volatility Cloud indicator to help visualize the strategy signals.

Read More

Boosting the RSI with the Modified Inverse Fisher Transform (MIFT) – Part 1

Date: 11/13/2013

Upside price action can be in sharp contrast to what is experienced to the downside. “The market goes down like an elevator, but up like an escalator,” as prices tend to fall faster than they rise. Read More

Viewing Relative Strength with Point and Figure Charting

Date: 7/10/2013

Relative strength is a powerful technical analysis tool for observing the relative performance of two assets. It is a separate tool from the Relative Strength Index (RSI), which is a technical indicator for a single security. Read More

Using Statistical and Implied Volatility in Trading

Date: 5/8/2013

The term “volatility” is used in contexts ranging from financial markets and chemistry to geopolitics. Most traders in financial markets understand that volatility refers to measurements of the magnitude of price movements – or whipsaws, depending on one’s perspective. Read More

Rediscovering Intermarket Relationships

Date: 3/13/2013

Analyzing market moves reveals dynamic intermarket relationships that can help traders stay in tune with current market conditions.


Read More

Seasonality: Studying Annual Price Cycles

Date: 1/9/2013

The study of seasonal tendencies in price movement, also known as seasonals or seasonality, is an area of market analysis intended to identify price patterns and possible turning points within the span of a year.

Read More

Introducing the Fibonacci Retracement Channel Indicator

Date: 12/12/2012

Fibonacci retracement levels within the channel often act as support and resistance, while breaking a well-established channel may reveal a change in trend. Read More

Trading Economic Events: Philadelphia Fed Business Outlook Survey

Date: 11/14/2012

Economic events such as the monthly release of the Business Outlook Survey from the Federal Reserve Bank of Philadelphia (Philly Fed Manufacturing Index) affect the markets each day. These events might turn the markets on a dime or cause the continuation of a prior move. Read More

Commitments of Traders: Breaking Down the Open Interest

Date: 10/10/2012

Each week, the Commodity Futures Trading Commission (CFTC or the Commission) issues the Commitments of Traders (COT) report. This report is a breakdown of the open interest in each of a long list of futures markets according to trader category.


Read More

A Fresh Look at ActivityBar Technology

Date: 9/12/2012

TradeStation’s ActivityData provides an interesting angle from which to view market prices and better understand the positioning of buyers and sellers.

Read More

Intraday Time Analysis

Date: 8/8/2012

Active traders make their livelihood in the charts of the intraday session, scanning the markets for recognizable patterns that that are persistent and profitable over time. However, the intraday session is influenced by numerous factors. Read More

Exploiting Correlation in Portfolio Analysis

Date: 7/11/2012

Balancing risk and expected return is a challenge for any investor considering different investment choices. Portfolio diversification may help reduce risk, and the lower the correlation between returns from different securities in a portfolio, the greater the diversification benefit. Read More

Identifying Market Bottoms:
IBD Follow-Through Days

Date: 6/13/2012

Major market bottoms are precursors to cyclical bull markets that may last for years. Spotting one after a substantial decline is a challenge for any trader.

Read More

A Comparative Study of Moving Averages: Simple, Weighted and Exponential

Date: 5/9/2012

The moving average may be the most universal of all technical analysis indicators. While it is tempting to dismiss the moving average as antiquated its staying power is testament to its utility.
Read More

Understanding and Using Correlation Analysis

Date: 4/11/2012

Correlation analysis is about observing the interaction of various securities and markets. Since these relationships are dynamic, it is useful to measure them historically and to monitor them in real time. Read More

Strategy Impact: Trade-Size Formulas, Part 2

Date: 3/14/2012

In this paper, the Kelly Criterion and Fixed Ratio concepts will be introduced to the discussion. The inner workings of these approaches and the pros and cons of each method will be examined, while also assessing their effects on strategy performance-related attributes, such as the relationship between minimal risk and maximal return. Read More

Analyzing Volume in the Pre-market Stock Session

Date: 2/8/2012

Traders of U.S. equities know that the conventional session for these securities is 9:30 a.m. to 4:00 p.m., U.S. Eastern Time. These hours have been in place on the New York Stock Exchange (NYSE) and NASDAQ for many years.

Read More

Advance/Decline Strategies –
S&P 500 Market Breadth

Date: 1/11/2012

Most stock-market indexes, with the notable exception of the Dow Jones Industrial Average, are constructed using a market‑capitalization weighting method. Read More

Sector Rotation – Spotting the Turns

Date: 12/14/2011

Sector rotation is based on the concept that different sectors of the equity markets perform differently during various phases of an economic cycle. Read More

Inside the Oil Markets

Date: 11/9/2011

Crude oil and its distilled products are essential parts of our modern world. From transportation and agriculture to heating and cooling, petroleum fuels industry and so much of the way we live.

Read More

Time-Weighted Average Price (TWAP): A New Approach

Date: 10/11/2011

The Time-Weighted Average Price (TWAP) is defined as the average price of a security over the course of a specified period of time. Read More

Strategy Impact: Trade-Size Formulas

Date: 9/14/2011

Trade size is an integral and often overlooked element of strategy trading.  As part of money management, when properly applied, it may allow the strategy trader to address how much risk he or she takes by adjusting the size of a trading position. Read More

Flashpoint: Crude Oil Inventories and Price Reactions

Date: 8/9/2011

Every Wednesday at 10:30 a.m. Eastern time, energy traders analyze and react to the headlines of the U.S. Energy Information Administration (EIA) Petroleum Status Report. Read More

Implied Volatility in 3-D

Date: 7/26/2011

An implied volatility surface is a three-dimensional plot that reveals implied volatility data for a number of different options series for a particular underlying security. Read More

Jensen's Alpha

Date: 7/12/2011

One of the basic tenets of finance is that riskier assets should have a higher expected return, as investors would not be willing to take on the additional risk unless they were rewarded appropriately.

Read More

Market-Neutral Pairs Trading

Date: 6/21/2011

Market-neutral equity trading is a relative value investment strategy that is designed to be unaffected by the returns of the overall market (S&P 500 Index). Read More

Identifying Periods of Financial Turbulence

Date: 6/7/2011

During the Great Recession, unusually high market volatility and financial turbulence affected the entire economy, surprising many buy-and-hold investors who have seen their portfolios greatly diminished in value. Read More

FX Volatility Part 2 - Introducing the Volatility Cloud Indicator

Date: 5/17/2011

The Volatility Cloud indicator utilizes 24-hour forex volatility maps to project potential amplitudes of hourly price movements. Read More

Anticipating Changes in the Federal Funds Rate

Date: 5/3/2011

In Economics 101, we are taught that the U.S. Federal Reserve Bank (the "Fed") conducts monetary policy through open market operations. These open market operations – the buying and selling of government securities – are how the Fed ultimately controls the federal funds interest rate. Read More

FX Volatility - Part 1

Date: 4/19/2011

Very much like people, foreign exchange (forex or FX) pairs have unique behaviors and traits that can be observed and studied over time. Read More

Mapping Intraday Price Movement in the S&P 500 Index (IRSA) – Part II

Date: 4/5/2011

In IRSA – Part II, our testing will examine the dominant price patterns that drive the intraday session of the S&P 500 Index. Read More

A New Look at Overbought/Oversold: The OBOS Index

Date: 3/22/2011

In oscillating markets, support and resistance levels are often used to determine efficient entry and exit points. Read More

Mapping Intraday Price Movement in the S&P 500 Index

Date: 3/8/2011

What if you heard that the S&P 500 Index gained 1 percent today? Read More

RSI Unleashed Part 2: Introducing the rRSI Strategy

Date: 2/22/2011

Part 1 (Analysis Concepts #16 - January 25, 2011) showed advanced Relative Strength Index (RSI) concepts, such as the use of dynamic overbought/oversold levels, that have been discussed in technical analysis books yet are often underutilized by traders. Read More

Weekly Jobless Claims - A Look at Market Reaction

Date: 2/8/2011

New economic releases are always important to anticipate and analyze in helping to determine the current and future state of the economy. Read More

RSI Unleashed - Building on Forgotten Characteristics Part 1

Date: 1/25/2011

While the Relative Strength Index (RSI) is probably the most commonly known and used technical oscillator, the original intent behind the RSI is often unknown to traders. Read More

Testing the CBOE Volatility Index (VIX)

Date: 1/11/2011

The CBOE Volatility Index, also known to traders as implied volatility, or simply the VIX, represents future volatility expectations as expressed in the options markets. Read More

Contrarian Z-Score

Date: 12/14/2010

Standard deviation is a common statistical calculation that is often used in the world of finance to measure risk. Read More

2 Rivers Strategy

Date: 11/30/2010

Accounting for volatility helps filter unwanted signals from a trend-following system, since highly volatile markets are partially to blame for whipsaws in such trading systems. Read More

$TICK - Tock - Testing the NYSE TICK Index

Date: 11/16/2010

If you search for the words "NYSE Tick Index" on the Internet, you will find links to many articles touting the success of using the Index as a trading signal. Read More

Intraday Support and Resistance - Using Volume-Weighted Average Price (VWAP)

Date: 11/2/2010

This custom intraday Volume-Weighted Average Price (VWAP) indicator provides estimated current and historical intraday VWAP values. Read More

Bulls vs. Bears: The Market Breadth Score

Date: 10/19/2010

Volatile and oscillating markets can often make it difficult to discern broader investor sentiment and market direction. Read More

Conditional XMA Strategy

Date: 10/5/2010

Among the well-known shortcomings of trend following systems is that they usually experience frustrating whipsaws when the market is not trending and that they also tend to give back much open profit before reversing. Read More

RSI Volatility Spread

Date: 9/21/2010

Average true range is often used as an indication of a security's volatility. Read More

NDX100/S&P500 Relative Strength Strategy

Date: 9/7/2010

According to the Capital Asset Pricing Model, when the broad market begins to advance or decline individual stocks will outperform or underperform the market averages based on their beta component or systematic risk in relation to the market. Read More

GARP - Growth at a Reasonable Price

Date: 8/24/2010

GARP, or Growth at a Reasonable Price, is an investment strategy popularized by noted money managers like Peter Lynch, Mario Gabelli, and David Dreman. Read More

Increasing Positive Correlation and Momentum

Date: 8/10/2010

Correlation is often used as a statistical measure to determine whether two securities move in the same direction, move in the opposite direction, or have no relation at all. Read More

Rank Stocks Based on Fundamental Score

Date: 7/27/2010

The Fundamental Score Indicator is an analysis technique created to analyze stocks strictly based on certain financial ratios of the company. Read More

Equity Market Monthly Seasonality
Part 2

Date: 7/13/2010

Part 1 of the series clearly demonstrated that seasonality-based rules can improve existing equity trading systems. Read More

Equity Market Monthly Seasonality
Part 1

Date: 6/29/2010

While seasonality forces may seem powerful and untamed, they can be harnessed for a trader's advantage. Read More

Swing 5 – Relative Strength Index Strategy

Date: 6/15/2010

Psychologically, one of the hardest things to do as a trader is to buy the dips in the market. Read More