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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
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
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.
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
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
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.
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
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
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
Analyzing market moves reveals dynamic intermarket relationships that can help traders stay in tune with current market conditions.
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.
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
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
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.
TradeStation’s ActivityData provides an interesting angle from which to view market prices and better understand the positioning of buyers and sellers.
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
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
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.
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
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
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
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.
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 is based on the concept that different sectors of the equity markets perform differently during various phases of an economic cycle. Read More
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.
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
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
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
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
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.
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
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
The Volatility Cloud indicator utilizes 24-hour forex volatility maps to project potential amplitudes of hourly price movements. Read More
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
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
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
In oscillating markets, support and resistance levels are often used to determine efficient entry and exit points. Read More
What if you heard that the S&P 500 Index gained 1 percent today? Read More
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
New economic releases are always important to anticipate and analyze in helping to determine the current and future state of the economy. Read More
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
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
Standard deviation is a common statistical calculation that is often used in the world of finance to measure risk. Read More
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
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
This custom intraday Volume-Weighted Average Price (VWAP) indicator provides estimated current and historical intraday VWAP values. Read More
Volatile and oscillating markets can often make it difficult to discern broader investor sentiment and market direction. Read More
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
Average true range is often used as an indication of a security's volatility. Read More
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, 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
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
The Fundamental Score Indicator is an analysis technique created to analyze stocks strictly based on certain financial ratios of the company. Read More
Part 1 of the series clearly demonstrated that seasonality-based rules can improve existing equity trading systems. Read More
While seasonality forces may seem powerful and untamed, they can be harnessed for a trader's advantage. Read More
Psychologically, one of the hardest things to do as a trader is to buy the dips in the market. Read More
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