Indicators, ETFs, and Market Strength: These 16 Active Trader and Currency Trader articles spanning 2001-2006 were written by contributing editor Thom Hartle. In addition to detailing trading techniques centered around specific indicators (the MFI, Bollinger Bands, the RSI, percentage retracements, and volume), the collection contains several articles that show how to use the tendencies of various exchange-traded funds (ETFs) — including spread techniques that help determine trend and which areas of the market are likely to move.

Now you can purchase this collection (as a single PDF file — print copies unavailable) for 30 percent off. The price listed is the discounted price.


ARTICLE 1: “Putting the squeeze on volatility” (Active Trader, November 2001)
Summary: Volatility is essential for profitable short-term trading. The BandWidth Indicator can help you identify points at which a market is poised to switch from a low-volatility to a high-volatility phase.

Excerpt: "People sometimes complain about excessive market volatility, but volatility is a trading necessity for one simple reason: Once a position is entered, the market has to move to a point where a reasonable profit is available.

Low volatility and sideways markets result in small profits and more losses. High volatility and trending markets mean good trades and more of them. It follows that identifying when a market is moving from a low-volatility environment to a high-volatility environment would improve the odds of profitable trading. The BandWidth Indicator (BWI) — a derivative of Bollinger Bands — can be used for this purpose."

ARTICLE 2: “The bottom and the Bands” (Active Trader, February 2003)
Summary: The W-bottom pattern reveals a great deal about market action — especially when it’s used in conjunction with Bollinger Bands.

Excerpt: "The technique for trading the W-bottom pattern, as described by John Bollinger in his book Bollinger on Bollinger Bands, blends classic technical analysis and modern indicator-based analysis.

It’s classic because the W-bottom concept consists of a double bottom supported by traditional volume characteristics: heavy volume on the first low, a price recovery and a retest of the low on lighter volume."

ARTICLE 3: “Relative volume analysis” (Active Trader, July 2003)
Summary: Traders commonly use total volume to take the pulse of price moves, but when it comes to determining whether the bulls or bears are in charge of the market, up and down volume speaks volumes.

Excerpt: "Volume has always been a component of classic technical analysis. For example, one of the precepts of trend analysis is that volume should increase in the direction of the longer-term trend and decrease during countertrend moves.

Although basic volume analysis can be useful, there’s more to volume than first meets the eye. End-of-day volume figures are comprised of the volume for stocks that are up (above the previous close), down (below the previous close) and unchanged on the day. More so than total volume, up volume and down volume can provide additional insight about the direction of the stock market."

ARTICLE 4: “Short-term oscillator opportunities” (Active Trader, September 2003)
Summary: Exploring the relationship between an exponential moving average and an oscillator leads to new ways of defining trend changes and capturing price swings.

Excerpt: "The difficulty is that while price swings are easily identifiable on historical charts, there is rarely a regular time relationship between these swing peaks and troughs. Life would certainly be easy if a market would simply bottom, rise for five days and peak, fall for three days and bottom, and then rise for five days again, repeating this pattern indefinitely. The reality is the number of price bars between swing peaks and troughs throughout a trend is much more than random.

One of the most popular oscillators, the relative strength index, can be used with a simple moving average to trade with the trend and to warn of trend reversals."

ARTICLE 5: “Retracement tendencies” (Active Trader, March 2004)
Summary: Traders often calculate likely retracement levels, but is there any validity to such techniques? Objectively defining trends and retracements makes it possible to analyze the price swings in a market and determine if retracements follow any noticeable patterns.

Excerpt: "The market never moves in a straight line — it repeatedly swings up and down on a shorter-term basis as it moves in the direction of the longer-term trend.

As such, retracement represent opportunities to get on board a trend. Traders often project retracement, or pullback levels to use as entry points."

ARTICLE 6: “Percent b” (Active Trader, April 2004)
Summary: Putting a new twist on an old indicator results in a tool that determines short-term market bias and sets up intraday swing trades with a little help from a price pattern.

Excerpt: "The eternal quest for would-be short-term traders is to find a way to identify swing points consistently and mechanically. It cannot be done, but traders never tire of experimenting with this or that indicator in the hope it will lead to a universal rule."

ARTICLE 7: “Following the money: Quarterly momentum and ETFs” (Active Trader, June 2004)
Summary: In certain situations, the market tips its hand regarding which sectors are likely to stay atop the market. Certain signals early in each quarter can help locate sectors that are likely to remain strong through the end of the quarter.

Excerpt: "Exchange Traded Funds (ETFs) — a group of related equity products that represent different indices, market sectors and groups, and which trade like stocks — have been enormously successful since the first few were launched in the 1990s. The two most popular are the Nasdaq 100 index-tracking stock (QQQ) and S&P 500 index-tracking stock (SPY).

However, there are many more available — more than 120 are listed at the Nasdaq Web site for evaluation (see ’Funds for all’, Active Trader, November 2002, p. 28), ranging from sector indices (biotechnology, IBB) to country-specific instruments (the Australian stock market, AAA) to Treasury bond index funds (TLT)."

ARTICLE 8: “The market facilitation index” (Active Trader, October 2004)
Summary: Traders are always looking for ways to determine when the market is poised to make a move. The Market Facilitation Index is a tool you can use to identify market lulls that can precede price trends.

Excerpt: "Trying to capture intraday moves that have already begun is fruitless. Nothing is more frustrating than having accurately anticipated the markets direction and having nothing to show for it.

What would help avoid these situations is an indicator that can signal lulls in the market. One indicator for measuring whether the market is in a potential pre-trend lull is the market facilitation index (MFI). Here, we will analyze the price action after high MFI readings to see if there’s a relationship worth trading."

ARTICLE 9: “The squat bar” (Active Trader, January 2005)
Summary: Traders often anticipate trend moves to follow low-volume, low volatility periods. The squat bar pattern shows high-volume bars can also lead to tradable price moves.

Excerpt: "Many techniques and indicators, such as on-balance volume and equivolume charts, have been devised specifically to gauge volume and price action. ’The Market Facilitation Index’ (Active Trader, October 2004, p. 70) discussed another volume-based indicator developed by Bill Williams, who detailed the MFI in his book Trading Chaos (John Wiley & Sons, 2004).

Williams used the MFI as one of two parameters to classify price bars into four categories. Here, we’ll analyze the category Williams referred to as the squat bar to see if it signals trade opportunities."

ARTICLE 10: “HOLDRS: Stock groups in a single trade” (Active Trader, April 2005)
Summary: Exchange traded funds (ETFs) such as HOLDRS allow traders and investors to specialize in certain indices, market sectors, or groups with a single "stock."

Excerpt: "Currently, there are more than 160 exchange-traded funds (ETFs) traders and investors can analyze or trade. These instruments, which trade like common stock, represent a wide range of market indices, sectors, and groups. Here, we will look at one group of ETFs — Merrill Lynch HOLDRS — and review their salient features.

HOLDRS stands for HOLding Company Depositary ReceiptS. HOLDRS offer the opportunity to trade a group of stocks with a single instrument, and thereby profit if a particular industry, group, or sector does well. The advantage of the group ownership represented by a HOLDRS is you don’t have to pick the best stock. Few investment decisions are as disappointing as owning an individual company that is having problems while its industry is doing well. (Of course, there’s always the risk that a single company’s woes will negatively impact an entire group.)"

ARTICLE 11: “Dissecting T-note futures: Tendencies and characteristics” (Active Trader, July 2005)
Summary: A detailed understanding of a market’s price history and characteristics allows you to craft trade strategies founded on statistical reality rather than casual observation. The following analysis takes the pulse of the T-note futures market.

Excerpt: "Analyzing the price history of the 10-year T-note futures market will allow us to identify its characteristics and determine if there has been any shift in its typical price behavior. We will identify typical daily ranges, closing prices relative to daily range, as well as tendencies for the low relative to the opening price for days the market closes up, and the high relative to the opening when the market closes down. With this information in hand, we’ll have a better understanding of this market and a stronger foundation on which to build strategies."

ARTICLE 12: “Index vs. Index: The QQQQ/SPY spread” (Active Trader, September 2005)
Summary: Analyzing the relative strength of major stock indices can help you define the market’s current condition and exploit trade setups at potential turning points.

Excerpt: "A relative strength calculation of two of the most popular exchange traded funds (ETFs) — the Nasdaq 100 index tracking stock (QQQQ) and the S&P 500 Depositary Receipts (SPY) — allows you to gauge the stock market’s overall trend and set up swing trades that are in sync with that trend. The setup outlined here uses an entry concept based on the work of Richard Wyckoff, a stock market analyst and educator from the 30s."

ARTICLE 13: “Comparing moving averages” (Currency Trader, November 2005)
Summary: This review provides simple ways to interpret and apply the most commonly used moving averages.

Excerpt: "Although moving averages can simplify price action and highlight the underlying trend, they also trail behind (lag) price action — the longer the moving average, the more it lags price. There are several types of moving averages; traders originally used the simple moving average (SMA) because it was easy to understand and calculate. Over time, other smoothing techniques were incorporated to reduce the lag inherent in the SMA. Here, we will compare the three most common moving average types — simple, weighted, and exponential."

ARTICLE 14: “The ETF money trail” (Active Trader, December 2005)
Summary: Quarter-by-quarter analysis shows how tracking ETF performance can tip you off to overall market performance and trade opportunities in certain sectors.

Excerpt: "’Following the money: Quarterly momentum and ETFs’ (Active Trader, June 2002) detailed a strategy for identifying ETF leaders early in the quarter. The premise was that money managers will commit capital to stocks offering the best opportunity for profit for the quarter. Thus, the ETFs leading the market at the beginning of a quarter had the potential to maintain their dominance for the entire quarter.

The following analysis reviews the findings of that article and, using the same procedures, explores how its concepts have held up in the eighteen months since publication."

ARTICLE 15: “Follow the leaders” (Active Trader, February 2006)
Summary: Updating analysis of ETF quarterly performance reveals market patterns over the past year and a half.

Excerpt: "Traders gravitate toward opportunity, and the easiest-to-exploit trading opportunities occur when the broad market is trending strongly and certain stock sectors or groups are attracting capital because of strong fundamentals. Regardless of the type of strategy you use, you can increase your chances of success by finding the best instruments to trade.

Simple screening techniques can signal which groups are exhibiting the kind of relative strength that sets them apart from the broader market. The following analysis updates a screening process explained in two previous Active Trader articles: ’Following the money: Quarterly momentum and ETFs’ and ’The ETF money trail.’"

ARTICLE 16: “The intraday MFI” (Active Trader, September 2006)
Summary: The bar-to-bar comparisons of volatility and volume in the Market Facilitation Index make it possible to logically determine when the indicator is relatively high and price follow-through is likely.

Excerpt: "There are different ways traders attempt to identify ’quiet periods’ that have the potential to be followed by bursts of price activity. Some people look for narrow consolidations, for example. The Market Facilitation Index (MFI) is an indicator that can serve the same role — mathematically.

The following analysis updates that study of the E-Mini S&P and also applies the same analysis to the E-Mini Nasdaq 100 (NQ) and E-Mini Russell 2000 (ER2) futures contracts to look for unique opportunities in these three markets."

Purchased separately, these 16 articles would cost $54. Now you can purchase them as a single collection for $37.80, a saving of 30 percent.