Editor’s note: Riccardo Ronco, CFTe, is the head of technical analysis at Aviate Global in London. He provided an overview of the benefits of trend following strategies at the MTA Annual Symposium in March. The complete presentation is available at the MTA’s Knowledge Base, the web’s free repository for everything related to technical analysis. Investing with the trend is a mainstay of many money managers who outperform their benchmark. Recent research proves this, showing that the majority of the returns from managed futures strategies is explained by tend following or momentum. That research provides a quantitative explanation for this behavior but it can also be explained with a simple chart. Behavioral finance heuristics, specifically anchoring and herding, explain why trend following works. To achieve profitable performance, an investment manager needs to find trends and trade with discipline. Technical analysis provides objective tools that can be used to find trends. The first step in

In 2001, Charles D. Kirkpatrick II, CMT, received the Charles H. Dow Award for his paper, Stock Selection: A Test of Relative Stock Values Reported over 17 ½ Years. The paper included results of a real-time test of stock selection criteria. Kirkpatrick explained that he maintained two lists, publishing selections in advance and tracking the performance after making the selections public. The results were summarized in two charts: In the Dow Award paper, Kirkpatrick described the stock selection rules and sells criteria he followed. Combining Criteria into model – The Parameters Each week the entire list of available U.S. stocks (usually around 5,000) was screened for those stocks at or above the 90th percentile in relative price and earnings growth. In List 1 an advancing chart pattern was also required.  Any stock not already on the list that met these criteria was added to the list. When relative price strength declined to or

Editor’s note: this article was originally published at the Global Financial Data blog and is reprinted here with permission. The government of Zimbabwe announced this week that they were finally demonetizing the Zimbabwe Dollar. Although the United States Dollar replaced the Zimbabwe Dollar in every day transactions back in 2009, banks still carried accounts that were denominated in Zimbabwe Dollars. Beginning on June 15, 2015, for only 35 quadrillion (35,000,000,000,000,000) Zimbabwe Dollars bank customers will receive one free portrait of George Washington. This opportunity expires in September. Believe it or not, Zimbabwe will not get in the Guinness Book of World Records for the most insane currency conversion. Hungary holds this dubious record because 400,000 quadrillion pengo were required to obtain one forint back in 1946 when Hungary went through its own currency conversion. Currently, the United States Dollars and South African Rand are used in Zimbabwe for everyday transactions. These two currencies

How would you describe your job? I work for an Asset Management firm where I work in a dual job as a technical analyst for the investment team and also as a buy-side trader who handles orders for the fund. I give recommendation to money managers based on my technical view after considering the direction of a stock’s trend, sector strength and my overall market view. For an institution such as my firm, outperformance is the key so I rely heavily on relative strength. There are a lot of opportunities to explore with relative strength. But more than that I believe the key to success is not the tools I use. It is the discipline to stick to the approach and a “think risk first” mentality. And, of course you need skill and experience to extract money from the market. Do you look at any fundamental or economic inputs to develop your

Editor’s note: this paper was originally published at The Brookings Institution web site. It is reprinted here because it provides into the supply side of markets, a critical area of study for technical analysts. Introduction US financial markets are critical to the functioning of our entire economy, providing more credit, for example, than banks do. Our unusually large financial markets have been an American competitive advantage for years, providing a costeffective means of matching investors with worthy companies and projects. Therefore, the current debate about whether market liquidity is drying up is an important one, since the ability to buy and sell securities is central to market functioning.  This primer provides an introduction to the issues by addressing the following questions. What is market liquidity? Why do we care about it? Has it actually declined? What do the recent bouts of market volatility mean? Why would we expect market liquidity to be down? Will market liquidity decline further? What

Editor’s note: while the Chart of the Month usually highlights a market of interest, this month’s chart highlights a potential investment management business opportunity that could be of interest to some members. Frank L. Teixeira, CFA, CMT, is an industry leader in “fusion investing” – integrating technical and fundamental analysis in the portfolio context. As a partner and senior vice president of the firm, he manages over $1 billion dollars in both domestic and foreign securities and leads the technical analysis division. During the MTA Annual Symposium, he shared some of his experiences managing money at Boston-based Wellington Management. Among the many interesting points he raised was the idea that momentum investing, an approach grounded in technical analysis, offers an opportunity in the investment management business. Two charts summarize the idea. In the second chart, the dark blue bars show the average annual returns of several investment styles. The values of these bars