Traders Library |
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 Schwager on Futures - Fundamental Analysis
In Fundamental Analysis, the legendary Jack D. Schwager has produced the most comprehensive, in-depth book ever written on the use of fundamental analysis for futures trading. In what is destined to become the bible of the futures industry, Schwager has poured out insights gathered during his long career as a trader, researcher, bestselling writer, and highly regarded authority in the field. Jack Schwager is one of the most important and visible figures in the futures industry today... read more
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Futures Glossary |
Initial margin requirement
When buying securities on margin, the proportion of the total market value of the securities that the investor must pay for in cash. The Security Exchange Act of 1934 gives the board of governors of the Federal Reserve the responsibility to set initial margin requirements, but individual brokerage firms are free to set higher requirements. In futures contracts, initial margin requirements are set by the exchange.
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Technical Studies |
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Slow Stochastic (SSTO)
Technical Studies - 30 March 2006
Dr. George C. Lane is the author of the stochastic indicator. His basic premise is as follows:During periods of price decreases, daily closes tend to accumulate near the extreme lows of the day. Periods of price increases tend to show closes accumulating near the extreme highs of the day. The stochastic study is an oscillator designed to indicate oversold and overbought market conditions.
Some technical analysts prefer the slow stochastic rather than the normal stochastic. The slow stochastic is simply the normal stochastic smoothed via a moving average technique.
The slow stochastic, like the normal stochastic study, generates two lines. They are %K and %D. The stochastic has overbought and oversold zones. Dr. Lane suggests using 80 as the overbought zone and 20 as the oversold zone. Other technicians prefer 75 and 25.
Dr. Lane also contends the most important signal is divergence between %D and the commodity. He explains divergence as the process where the stochastic %D line makes a series of lower highs while the commodity makes a series of higher highs. This signals an overbought market. An oversold market exhibits a series of lower lows while the %D makes a series of higher lows.
When one of the above patterns appear, you should anticipate a market signal. You initiate a market position when the %K crosses the %D from the right-hand side. A right-hand crossover is when the %D has bottomed or topped and is moving higher or lower and the %K crosses the %D line. According to Dr. Lane, your most reliable trades occur with divergence and when the %D is between 10 and 15 for a buy signal and between 85 and 90 for a sell signal.
Parameters
Overall Period - the number of periods used to determine the highest high and lowest low.
%K MA Period - the number of periods used to determine the moving average for the %K value.
%D MA Period - the number of periods used to determine the moving average for the %D value.
AdditionalLinePeriod - the number of periods used to determine an additional Moving Average on the Stochastic.
Information provided by FutureSource |
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