Stocks & Commodities V. 31:10 (8–9): Letters To S&C by Technical Analysis Inc.

Letters To S&C by Technical Analysis Inc.

BACK TO BASICS

Editor,

What’s the newest craze in commodity trading? Going back to basics, as Ronald Stuart requested in his letter to S&C in your August 2013 issue.

I have been teaching the basics of trading for more than 10 years. I am now semi-retired from trading, but when I started trading in 1984, I read Commodity Perspective magazine. Each day, I filled in charts by hand. Each day, the tally sheet would come in the mail and you had three days to correct any mistakes. Those who were traders did better, as each trade had to be written down and checked against the broker’s sheet that was mailed. There were only three data suppliers then. But my old Epson 286 with a math coprocessor was great, as was my CQG data via satellite on a monochrome screen. All orders had to be called in via phone. The library had only two dozen books on its shelves about trading, and most were historical charts. I sent away for free booklets from brokers that advertised in the Wall Street Journal on “how to place an order” — yes, we had to place orders by phone in a specific wording order.

I received several booklets that I still keep next to my desk today, from Lind- Waldock, the CME, CBOT, and works by Jake Bernstein, Larry Williams, plus a few inept how-to books on technical analysis. Then I came across George Lane and stochastics, and next J. Welles Wilder’s book. From then on, I was a tiger, making up to 50 trades a day.

I now teach. I’ve taken dozens of classes over the years — several from George Lane himself. I am a bit partial since he developed stochastics while at the University of Michigan and I am a Michigander. He used a Univac in 1955–57 that took up a room as big as my living room today. Today, our cell phones have more computing power than that Univac did. From many of the classes and seminars that I have taken, it seems that no one really knows how to use stochastics. Calculating it by hand, as well as making a “jig” to do backtesting, was work. A “jig” is a template; after taping several years of Commodity Perspective together on the wall, I would trace back the algorithm I was backtesting via the template and see if my calculations worked. Today, people think the computer will do it all for you.