V14:10 (460-461): Traders' Tips

V14:10 (460-461): Traders' Tips
Item# \V14\C10\TRADERS.PDF
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The K-ratio model, which is discussed in Editor Thom Hartle's interview with Nelson Freeburg, is a technique used by Freeburg to generate signals in the precious metals market. The K-ratio model is based on the ratio of Barron's Gold Mining Index (GMI) to gold bullion, over which Bollinger bands are plotted to generate adaptive signals that conform to patterns of price behavior in the precious metals market.

To recreate Freeburg's precious metals switch fund system in MetaStock for Windows, you must first create the K-ratio as a composite security. To do this, launch The DownLoader from Meta-Stock and choose New and then Composite from The DownLoader's File menu. Make sure the directory specified is the directory where your weekly GMI and Handy & Harman data are located. Name the composite "K-ratio," then choose the Barron's GMI as the primary symbol and Handy & Harman prices as the secondary symbol. Next, choose Divide as the operator and then click the OK button to add the composite.

Open the K-ratio chart in MetaStock, plot the Bollinger bands indicator and enter 46 for the number of periods and 2.3 for the standard deviations. Plot Bollinger bands again and enter 4 for the periods and 1.6 for the standard deviations. Your chart should look similar to the one in Figure 1.

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