{"title":"Favorite Articles from 2010","description":"Each year we survey our readers for our Readers' Choice Awards, which are published in the annual Bonus Issue. As part of the survey, we ask readers to vote for their favorite article from the past year. Here are the award winners for \"Favorite STOCKS \u0026amp; COMMODITIES Article\" from 2010:","products":[{"product_id":"stcov282voin","title":"Stocks \u0026 Commodities V. 28:1 (20-30): The Vortex Indicator by Etienne Botes and Douglas Siepman","description":"The Vortex Indicator by Etienne Botes and Douglas Siepman\u003cbr\u003e\u003cbr\u003eThe search for a reliable technical indicator for trading a change in market direction seems to be a never-ending quest. Ideally, such an indicator should be on time; neither lagging the market nor too sensitive. The Vortex Indicator was developed as a new directional movement indicator, drawing inspiration in part from J. Welles Wilders directional movement indicator. The result is a simple but effective indicator that can be used to develop intriguing trading ideas.\u003cbr\u003e\u003cbr\u003eAfter thoroughly researching technical tools, we concluded that the concept of the directional movement index (Dmi) offered the most accurate way to identify trend direction or significant price moves in the market. The concept of Dmi was best defined and described by J. Welles Wilder in his classic 1978 book New Concepts In Technical Trading Systems. The result of his work is the now-famous and highly effective indicator, which inspired the creation of our Vortex Indicator.\u003cbr\u003e\u003cbr\u003eTo understand the Vortex Indicator better, we must describe directional movement. The idea is that the individual relationship between price bars provides clues to the direction of the trend or market. Wilder summed it up thus: Directional movement is the largest part of todays range that is outside yesterdays range.\u003cbr\u003e\u003cbr\u003ePositive directional movement is simply the portion of a price bar that is above the high of the previous bar. Negative directional movement is the portion of the price bar that is lower than the previous low. The smaller of these two values is assigned a zero value. The larger number is used to indicate if the market is moving up (positive) or down (negative). In the case of an inside bar (if neither the high nor the low is higher or lower than the previous bar), a zero value is assigned to both positive and negative direction.\u003cbr\u003e\u003cbr\u003eThe result will be a string of seemingly random consecutive zeroes or positive numbers placed in two columns assigned for positive and negative directional movement. However, if these two strings of numbers are summed after 14, 21, or 55 periods, the larger value gives an indication of overall trend. If this process is continued, the result can be seen on a chart as two lines representing positive and negative directional movement. These will intersect and cross during a change of trend and diverge wider and wider as the strength of the trend increases. This is the basis of Wilders Dmi.\u003cbr\u003e\u003cbr\u003eINSPIRATION FROM NATURE\u003cbr\u003e\u003cbr\u003eThe Vortex Indicators inspiration for another view on directional movement comes from an entirely different source. Viktor Schauberger (18851958), who is viewed as the father of implosion technology, was an Austrian forester, experimenter, and inventor. He sought to develop energy-producing machines that, through their shape, form, and motion, were able to mimic the power of natures processes. The foundation of his work came from studying nature and analyzing the fluidic vortexes of water in rivers and streams, and later in pipes and turbines.","brand":"store-traders-com","offers":[{"title":"Default Title","offer_id":52133922603377,"sku":"\\V28\\C01\\005BOTE.PDF","price":3.95,"currency_code":"USD","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0900\/3843\/6209\/files\/unnamed_e4bfbd4f-a0a1-487e-bebd-08f2cad3f4f1.jpg?v=1739657482"},{"product_id":"stcov281gecl","title":"Stocks \u0026 Commodities V. 28:9 (16-21): Getting Clear With Short-Term Swings by Ron Black","description":"Getting Clear With Short-Term Swings by Ron Black\u003cbr\u003e\u003cbr\u003eDoes an indicator that works on all time frames, requires no calculation, and has no delay sound too good to be true? Its not.\u003cbr\u003e\u003cbr\u003eThe technicians unending task is to find a signal in a sea of data. Price patterns can be choppy, chaotic, and wiggly. Sometimes the technician tries to smooth the upward and downward surges in price action in order to make the price movement easier to interpret. But this smoothing can reduce his or her indicators sensitivity to the immediate direction of the price.\u003cbr\u003e\u003cbr\u003eThe Clear method, a new technique for identifying the direction of short-term price swings, identifies the direction of the current price swing and the precise day when price direction changes. It works on all time frames, requires no calculation, and has no delay. It is applicable to all stocks, commodities, and indexes. The Clear method is unique because, unlike most technical indicators, it does not use the opening price or the closing price. Instead, it uses the range (length) of the price bar. It is effective because it borrows from a basic statistical concept: if two distributions do not overlap, they can be considered different.\u003cbr\u003e\u003cbr\u003e(A note to our statistician friends: this paper is not intended to examine the subtleties of sampling errors, sample size, covariance, confidence intervals, or any other statistical description. I am merely adapting a statistical concept for the purpose of analyzing price action.)\u003cbr\u003e\u003cbr\u003eDISTRIBUTIONS\u003cbr\u003e\u003cbr\u003eLets begin with a short description of distributions. What if someone asked you, How fast do cars go on the freeway? You are analytical. You want to find the answer. You rent a radar gun and a tripod, set the equipment up on an overpass, and record the speed of every vehicle that passes beneath the overpass for the next hour. Obviously, you would get many different values for the speeds of the different vehicles that traveled under the overpass.","brand":"store-traders-com","offers":[{"title":"Default Title","offer_id":52133939937649,"sku":"170BLAKPDF","price":3.95,"currency_code":"USD","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0900\/3843\/6209\/files\/unnamed_1e2ba380-6dce-4a91-af25-1962461950af.jpg?v=1739658486"},{"product_id":"stcov283smrs","title":"Stocks \u0026 Commodities V. 28:10 (38-44): A Smoothed RSI Inverse Fisher Transform by Sylvain Vervoort","description":"A Smoothed RSI Inverse Fisher Transform by Sylvain Vervoort\u003cbr\u003e\u003cbr\u003eThis indicator gives clear entry and exit signals, so your trading decisions are easier.\u003cbr\u003e\u003cbr\u003eThe Fisher transform has been a familiar concept to Stocks \u0026amp; Commodities readers in recent years following its introduction in 2002 by frequent S\u0026amp;C contributor John Ehlers. Its creator, Ronald Fisher, was one of the leading scientists of the 20th century, making major contributions to statistics, evolutionary biology, and genetics. Ehlers 2004 followup applied an inverse Fisher transform to the relative strength index (Rsi), changing what was a good turning-point indicator to one that fine-tuned the timing of possible entry and exit points. Here is the inverse Fisher transform formula:\u003cbr\u003e\u003cbr\u003ey = (Exp(2 * x) - 1)\/(Exp(2 * x) + 1)\u003cbr\u003e\u003cbr\u003ewhere x is the input value and y is the transformed value.\u003cbr\u003e\u003cbr\u003eFigure 1 shows a plot of the inverse Fisher transform. The transform creates boundaries to keep the output value in the range between ‑1 to +1. Input values larger than 2 generate a result close to 1, while input values less than ‑2 generate a result close to ‑1. This boundary characteristic is useful with any indicator moving between two fixed values, like the relative strength index (Rsi).","brand":"store-traders-com","offers":[{"title":"Default Title","offer_id":52133983060337,"sku":"192VERVPDF","price":3.95,"currency_code":"USD","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0900\/3843\/6209\/files\/unnamed_5505749e-890b-43a8-85cd-7e72cde6bae3.jpg?v=1739660347"},{"product_id":"stcov282maan","title":"Stocks \u0026 Commodities V. 28:12 (24-26): MACD and Trendlines by Danish Kapur","description":"MACD and Trendlines by Danish Kapur\u003cbr\u003e\u003cbr\u003eUsing the moving average convergence\/divergence together with trendlines helps to filter out false signals.\u003cbr\u003e\u003cbr\u003eThe moving average convergence\/divergence (Macd) (12, 26, 9) is powerful when it comes to indicating buy and sell signals. After having applied it to my trading for quite a while, I realized that the major problem with Macd was that often, the signals turn out to be false. For example, in Figure 1, the Indian rupee\/US dollar (Inr\/Usd), the Macd gave a signal to buy the dollar against the rupee in the second quarter of 2007 (May 2007) when the Inr was trading at Inr\/Usd 40.50\/1.00. But the signal turned out to be a false one and Inr actually strengthened to Inr\/Usd 39.00\/1.00. Also noteworthy is how even after one year (May 2008), Inr\/Usd was trading at the same level.\u003cbr\u003e\u003cbr\u003eThe same thing happened in the second quarter of 2009 when the Macd gave a signal to buy the US dollar against rupee (Inr\/Usd 46.5\/1), but that too turned out to be a short-term bounce and the rupee started strengthening after initial weakness to Inr\/Usd 49.00\/1.00. As you can see, it is now trading at Inr\/Usd 44.5\/1.\u003cbr\u003e\u003cbr\u003eDIVERGENCE 1\u003cbr\u003e\u003cbr\u003eI prefer to use the MACD to look for divergences, as MACD together with trendlines really helps in filtering out false signals. In Figure 1, you can see that in second-quarter 2007, the Indian rupee kept making lower lows and lower highs, but Macd was moving in the opposite direction, making higher lows and higher highs (displayed as divergence 1). This is considered to be a bullish divergence, and you should think of it as a warning for a trend change. I would not take any action on just this divergence but wait for price to cross the downsloping trendline (shown as trendline 1) to reverse my position (that is, sell the rupee to buy the dollar).","brand":"store-traders-com","offers":[{"title":"Default Title","offer_id":52133987090801,"sku":"230KAUPPDF","price":2.95,"currency_code":"USD","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0900\/3843\/6209\/files\/unnamed_a78780f6-16b7-4b1b-b5ad-685f3609893c.jpg?v=1739660653"},{"product_id":"stcov284sefo","title":"Stocks \u0026 Commodities V. 28:1 (48-53): The Search For Your Trading Style by Donald Pendergast","description":"The Search For Your Trading Style by Donald Pendergast\u003cbr\u003e\u003cbr\u003eHeres a simple trading method you can apply if you trade with a longer-term outlook.\u003cbr\u003e\u003cbr\u003eI hope my recent article, Crash Course For Novice Traders, caused you to reflect on the critical decisions that youll need to make before pursuing an aggressive program of trading or investing. If you havent read the article yet and youre struggling to stay afloat as a trader and\/or investor, consider taking a few minutes now and read that article, as it may help you locate significant areas of deficiency in your overall trading plan.\u003cbr\u003e\u003cbr\u003eA PLAN WITH A LONG-TERM OUTLOOK\u003cbr\u003e\u003cbr\u003eThis time, I want to lay out the basics of a particular style of trading that may be suitable for investors and traders with a long-term outlook on the markets they follow. Trend-following is the term assigned to this mode of trading, a style that relies on mechanical system entry\/exit triggers to open and close a trading position. Normally, the goal of a trend-follower is to stay in a trade as long as possible, relying on mechanical entries\/exits to determine the holding period; normally, trend-followers dont set price targets or scale out of winning trades, preferring to stay with their well-tested trend-following systems to make all of the decisions.\u003cbr\u003e\u003cbr\u003eTrend-following (TF) can be a very profitable way to trade, particularly when a TF entry signal results in a 100%, 200%, or even 500% gain on a low-priced stock or commodity, one that embarks on a multimonth (multiyear) trending move to astounding price levels. Conversely, for the trader\/investor relying on such methods, TF systems can also be frustrating, even nerve-wracking at times, especially since many TF systems sport win ratios of only 3045%, and periods of system drawdown (DD) can last for extended periods of time. Nevertheless, there are many examples of successful TF systems that make consistently good money over long periods of time.","brand":"store-traders-com","offers":[{"title":"Default Title","offer_id":52134119997809,"sku":"\\V28\\C01\\009PEND.PDF","price":2.95,"currency_code":"USD","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0900\/3843\/6209\/files\/unnamed_0303e3ab-1acd-4d1a-8c0a-75f4977afe31.jpg?v=1739667361"},{"product_id":"stcov281350s","title":"Stocks \u0026 Commodities V. 28:2 (14-23): The 350 Swing Trade by Barbara Star, PhD.","description":"The 350 Swing Trade by Barbara Star, PhD.\u003cbr\u003e\u003cbr\u003eThis indicator can help you identify\nthe beginning and end of a price swing.\u003cbr\u003e\u003cbr\u003e\nWhen markets exhibit greater and greater volatility, traders move away from longer-term trading methods with their potentially devastating drawdowns and move toward more nimble strategies that catch shorter-term price moves. Among the many short-term trading methods, swing trading, with its emphasis on trades that last from a few days to a few weeks, offers a good middle ground that makes trading more manageable.\u003cbr\u003e\u003cbr\u003eTraders may use a variety of methods to identify the beginnings and endings of a price swing. They include patterns formed by price bars or candlesticks, support\/resistance zones, pullbacks in an existing trend, Fibonacci levels, or momentum indicators. The approach used in this article is based on the relative strength index (RSI), a momentum indicator developed by J. Welles Wilder.\u003cbr\u003e\u003cbr\u003eTHE 350 SWING INDICATOR\u003cbr\u003e\u003cbr\u003eThe RSI identifies potentially overbought and oversold levels at which price may reverse direction. However, its default lookback period of 14 does not work well to identify short-term price swings. It tends to remain in a type of no-mans land between its 30 and 70 levels for long periods, catching fairly large drawdowns before reaching overbought or oversold levels.\u003cbr\u003e\u003cbr\u003eDecreasing the lookback period increases the indicators sensitivity to smaller price moves sometimes too much. That was the case when I changed the 14-period RSI to a three-period RSI (see sidebar RSI 3). The result was numerous false signals.","brand":"store-traders-com","offers":[{"title":"Default Title","offer_id":52134127337841,"sku":"\\V28\\C02\\023STAR.PDF","price":3.95,"currency_code":"USD","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0900\/3843\/6209\/files\/unnamed_2e57c8d1-4798-4815-bdfa-f9bb7777ee17.jpg?v=1739667688"},{"product_id":"stcov283zela","title":"Stocks \u0026 Commodities V. 28:11 (30-35): Zero Lag (Well, Almost) by John Ehlers and Ric Way","description":"Zero Lag (Well, Almost) by John Ehlers and Ric Way\u003cbr\u003e\u003cbr\u003eA little lag is a good thing. Heres how you can remove a selected amount from an exponential moving average and use the filter in an effective trading strategy.\u003cbr\u003e\u003cbr\u003eALL smoothing filters and moving averages have lag. The lag is necessary because the smoothing is done using past data. Therefore, the averaging includes the effects of the data as of several bars ago. In this article we show you how to remove a selected amount of lag from an exponential moving average (EMA). Removing all the lag is not necessarily a good thing, because with no lag, the indicator would just track out the price you were filtering; the amount of lag removed is a tradeoff with the amount of smoothing you are willing to forgo. We show you the effects of lag removal in an indicator and then use the filter in an effective trading strategy.\u003cbr\u003e\u003cbr\u003eTHE EMA\u003cbr\u003e\u003cbr\u003eAn exponential moving average (Ema) is computed by taking a fraction of the current price and adding to it the quantity (1 fraction) times the previously computed value of the Ema. That fraction is called the smoothing factor and is commonly called α (alpha), and alpha is always less than 1. The equation for an Ema can be written as:\u003cbr\u003e\u003cbr\u003eEMA = α * Price + (1 α) * EMA[1];\u003cbr\u003e\u003cbr\u003ewhere EMA[1] is the value of the EMA one bar ago.\u003cbr\u003e\u003cbr\u003eEngineers often describe filters in terms of their impulse response. An impulse is where the data has a finite value at one sample and a zero value at all other samples. Suppose an impulse of data has a value of 1\/α. When the Ema is applied to this impulse, the filter output at the end of the first sample is just 1 because there is no previous value in the filter. On the next sample, the input value is zero, and the previous value of 1 is multiplied by (1 α), so the output is (1 α). On the third sample, there again is no new input and the previous value of (1 α) is multiplied by (1 α), so the output is (1 α)2.","brand":"store-traders-com","offers":[{"title":"Default Title","offer_id":52134137135473,"sku":"211EHLEPDF","price":3.95,"currency_code":"USD","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0900\/3843\/6209\/files\/unnamed_3b655937-904f-4ed3-aed0-6e4b330fb24b.jpg?v=1739668437"},{"product_id":"stcov284smbo","title":"Stocks \u0026 Commodities V. 28:5 (40-44): Smoothing The Bollinger %b by Sylvain Vervoort","description":"Smoothing The Bollinger %b by Sylvain Vervoort\u003cbr\u003e\u003cbr\u003eThis variation of the popular Bollinger %b indicator gives clear turning points that will help traders identify entry and exit points while prices are moving between the Bollinger bands.\u003cbr\u003e\u003cbr\u003eBy now, everybody in the business knows that Bollinger bands were developed by John Bollinger. What they actually are is probably equally known. The Bollinger bands in Figure 1 consist of a set of three curves drawn in relation to price data. The middle band is usually a simple 20-bar moving average that serves as the base for the upper and lower bands.\u003cbr\u003e\u003cbr\u003eUpper band = Middle band + 2 x 20-period closing prices standard deviation\nLower band = Middle band 2 x 20-period closing prices standard deviation\u003cbr\u003e\u003cbr\u003e\nMost technical analysis programs have a built-in function for displaying Bollinger bands. Here is the MetaStock formula for Bollinger bands using basic functions:\u003cbr\u003e\u003cbr\u003e{The middle band}\nMov(Close,20,Simple);\n{The upper band}\n2*Stdev(Close,20 ) + Mov(Close,20,Simple);\n{The lower band}\nMov(Close,20,Simple)-2*Stdev(Close,20)\u003cbr\u003e\u003cbr\u003eIn a normal distribution, most prices of a set of data are close to the average, with relatively few prices moving in one extreme or the other. If you were to look at a normally distributed data on a graph, it would look like a bell curve. Not all price data will reflect a perfect curve, of course. The standard deviation of the 20-period closing prices is a statistic that tells you how tight the price data are clustered around the mean.","brand":"store-traders-com","offers":[{"title":"Default Title","offer_id":52134162956657,"sku":"\\V28\\C05\\094VERV.PDF","price":3.95,"currency_code":"USD","in_stock":true}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0900\/3843\/6209\/files\/unnamed_4162977e-583c-41f2-80e0-b75d29ed9d38.jpg?v=1739669688"}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/0900\/3843\/6209\/collections\/favorite-articles-from-2013-21_9b5b1edc-74c3-4cf8-9d19-e2d8aa3659c6.gif?v=1790892579","url":"https:\/\/shop.traders.com\/collections\/faarfr203.oembed","provider":"Stocks \u0026 Commodities","version":"1.0","type":"link"}