Full index of posts »
StockTalks

6 Points To Remember About Uncovered Puts http://seekingalpha.com/p/24tg9 Dec 23, 2014

Higher Than Average Net Returns Using “Relative Correlation” http://seekingalpha.com/p/24dsn Dec 17, 2014

Flaws In The Current Ratio http://seekingalpha.com/p/24a95 Dec 16, 2014
Latest Comments
 Thomsett on Can You Create Consistent Trading Profits? Order "Profiting from Technical Analysis a...
 Thomsett on The Theory Of Relative Correlation – Are Consistently High Returns Possible? This book can be preordered at http://www.ftpr...
 Thomsett on The Theory Of Relative Correlation – Are Consistently High Returns Possible? I am speaking on this topic on November 20 (8:3...
 Thomsett on Three Ways To Use Fundamentals To Pick Stocks Combining fundamental and technical signals giv...
 Thomsett on Does option trading affect stock prices? There may be an effect between strike and stock...
Most Commented
 Is "buy and hold" the smartest investing strategy? (6 Comments)
 Please Come To A Free Webinar About The Covered Call  This Wednesday 4:30 EST (6 Comments)
 The Ratio Calendar Spread  Options With Creativity (6 Comments)
 Problems with BlackScholes (5 Comments)
 The Dividend Collar  DoubleDigit Returns And Low Risk Combined In One Strategy (5 Comments)
View Thomsett's Instablogs on:
Consistent Trading Profits With “Relative Correlation”
(click to enlarge)The system I used is that of relative correlation, which refers to the attributes of price movement and signals. These attributes, when all found together, create a powerful system for signal and confirmation.
This is based on the use of candlestick signals and other technical signals (including gaps, triangles, and wedges, for example).
The attributes include:
A few key observations: Strong trends tend to lead to strong reversal or continuation signals. And these in turn tend to lead to stronger than average confirmation signals. The resulting price direction (reversal or confirmation) also tends to be stronger than average in this case.
The same is true on the other side. A weak trend tends to lead to weak signals and weak confirmation; and the results are also weak, meaning they are more likely to fail or contradict the indicated direction.
Is relative correlation just a theory, or does it work? I have conducted a twoyear study using this theory and executing 578 trades during trading hours, using bid and ask appropriately and adjusting for trading costs on both entry and exit. Based on the relative correlation approach to trading, 91.6% of these trades were profitable; and the average annual rate of return was 35%.
All of these trades can be studied and analyzed free of change in the archives of my website, ThomsettOptions.com where trades are shown by entry date, basis, close, profit or loss, and rate of return.
A have written a book documenting this theory and its application. It is published by FT Press and is available now. The title is Profiting from Technical Analysis and Candlestick Indicators. It can be ordered from www.ftpress.com or www.amazon.com  here is a summary of the table of contents:
IntroductionThe SelfFulfilling Prophecy
Chapter 1Charting Techniques  Predicting the Future
Chapter 2Traditional Analysis  the Power of Pattern Recognition
Chapter 3Candlestick Patterns  Recognizing Evolving Strength or Weakness
Chapter 4Reversal Signals  Spotting the Turning Point
Chapter 5Continuation Signals  the MidTrend Signs
Chapter 6Combining West and East  Candlesticks and the Technical Signs
Chapter 7Confirmation  an Essential Second Part of a Signal
Chapter 8Support and Resistance  Key Price Points in the Trend
Chapter 9Moving Averages  Finding Statistical Correlation
Chapter 10Volume Indicators  Confirmation of Price
Chapter 11Momentum Indicators  the Exhaustion Point
Chapter 12Signals Failures and False Indicators  the Misguiding Signal
Chapter 13Beyond the Signal  Candlestick Pattern Moves
Chapter 14Risk Reduction MethodsUsing Charting Techniques to Manage Risk
Appendix A: Hypothesis Summary
Appendix B: Hypothesis Testing
Endnotes
Index
Short Option ProfitTaking Strategies
click here to see the full article
Also check these books:
Getting Started in Options
Getting Started in Advanced Options
Covering Short Options With Long Options
Remember how boring math class was? I was always getting in trouble ...
Click here for the full article
Also check these books:
Getting Started in Options
Getting Started in Advanced Options