Posted on

Ralph Nelson Elliott

Ralph Nelson Elliott
Ralph Nelson Elliott (28 July 1871 – 15 January 1948) was an American accountant and author, whose study of stock market data led him to develop the Wave Principle, a form of technical analysis that identifies trends in the financial markets. He proposed that market prices unfold in specific patterns, which practitioners today call Elliott waves.

In the early 1930s, Elliott began his systematic study of seventy-five years of stock market data, including index charts with increments ranging from yearly to half-hourly. In August 1938, he detailed the results of his studies by publishing his third book (written in collaboration with Charles J. Collins), entitled The Wave Principle. Elliott stated that, while stock market prices may appear random and unpredictable, they actually follow predictable, natural laws and can be measured and forecast using Fibonacci numbers. Soon after the publication of The Wave PrincipleFinancial World magazine commissioned Elliott to write twelve articles (under the same title as his book) describing his new method of market forecasting.

In the early 1940s, Elliott expanded his theory to apply to all collective human behaviors. His final major work was his most comprehensive: Nature’s Law –The Secret of the Universe published in June, 1946, two years before he died.

In the years after Elliott’s death, other practitioners (including Charles Collins, Hamilton Bolton, Richard Russell and A.J. Frost) continued to use the wave principle and provide forecasts to investors. Frost and Robert Prechter wrote Elliott Wave Principle, published in 1978 (Prechter had come across Elliott’s works while working as a market technician at Merrill Lynch; his prominence as a forecaster during the bull market of the 1980s helped bring Elliott’s wave principle its greatest exposure up to that time).

There are also other analysts, such as Glenn Neely, that do not fully subscribe to Elliott’s wave theory, but have used it as a starting point to develop their own wave prediction methods.

Posted on

J.M. Hurst

J.M. Hurst

J.M. Hurst is known by many contemporary market technicians as the ‘father’ of modern cyclic analysis. When he first introduced his concepts in the early 1970’s through his classic work “The Profit Magic of Stock Transaction Timing”, he quickly developed a loyal following from market technicians all over the country, eager to learn his techniques and apply the principles. For a few short years, he even taught a course on cyclic analysis.

Unfortunately, like W.D. Gann before him, most of Hurst’s techniques were too complicated for the average trader, and only a relative few know how to apply the concepts in real-time in today’s markets. In irony, Hurst disappeared shortly thereafter, taking most of what he knew and understood along with him. Sadly, Mr. Hurst passed away in 2005. 

Hurst’s theory of channel and envelope analysis was the cornerstone of his work, with time cycles and classic trendline analysis used to aid the forecasting  techniques. Although likely impossible to do for an
extended period of time, a 13-week real-time experiment from the Hurst group produced a 90% accuracy in buying and selling stocks, using his proprietary techniques of cyclical analysis.
  • The Profit Magic of Stock Transaction Timing
  • Cyclic Analysis: A Dynamic Approach to Technical Analysis
  • The impact of networks on unemployment
  • Profit Magic Stock Transaction Timing
  • The Profit Magic of Stock Transaction Timing
Posted on

Jesse Livermore: Lessons From A Legendary Trader

Jesse Livermore: Lessons From A Legendary Trader

Born in 1877, Jesse Livermore is one of the greatest traders that few people know about. While a book on his life written by Edwin Lefèvre, “Reminiscences of a Stock Operator” (1923), is highly regarded as a must-read for all traders, it deserves more than a passing recommendation. Livermore, who is the author of “How to Trade in Stocks”(1940), was one of the greatest traders of all time. At his peak in 1929, Jesse Livermore was worth $100 million, which in today’s dollars roughly equates to $1.5-13 billion, depending on the index used.

The enormity of his success becomes even more staggering when considering that he traded on his own, using his own funds, his own system, and not trading anyone else’s capital in conjunction. There is no question that times have changed since Mr. Livermore traded stocks and commodities. Markets were thinly traded, compared to today, and the moves volatile. Jesse speaks of sliding major stocks multiple points with the purchase or sale of 1,000 shares. And yet, despite the difference in the markets, such automation increased liquidity, technology, regulation and a host of other factors that still drive the markets today.

The Test of Time
Given that this trader’s rules still apply, and the price patterns he looked for are still very relevant today, we will look at a summary of the patterns Jesse traded, as well his timing indicators and trading rules.

Price Patterns
Jesse did not have the convenience of modern-day charts to graph his price patterns. Instead, the patterns were simply prices that he kept track of in a ledger. He only liked trading in stocks that were moving in a trend, and avoided ranging markets. When prices approached a pivotal point, he waited to see how they reacted.

For instance, if a stock made a $50 low, bounced up to $60 and was now heading back down to $50, Jesse’s rules stipulated waiting until the pivotal point was in play in order to trade. If that same stock moved to $48, he would enter a trade on the short side. If it bounced up off the $50 level, he would enter long at $52, closely watching the $60 level, which is also a “pivotal point.” A rise above $60 would trigger an addition to the position (pyramiding) at $63, for example. Failure to penetrate or hold above $60 would result in a liquidation of the long positions. The $2 buffer on the breakout in this example is not exact; the buffer will differ based on stock price and volatility. We want a buffer between actual breakout and entry that allows us to get into the move early, but will result in fewer false breakouts.

While Jesse did not trade ranges, he did trade breakouts from ranging markets. He used a similar strategy as above, entering on a new high or low but using a buffer to reduce the likelihood of false breakouts.

Price patterns, combined with volume analysis, were also used to determine if the trade would be kept open. Some of the criteria Jesse used to determine if he was in the right position were:

  • Increased volume on breakout.
  • The first few days after the break prices should move in the breakout direction
  • A normal reaction occurs where prices retrace somewhat against the trend, but volume is lower on retracements than it was in the trending direction.
  • As the normal reaction ends, volume increases once again in the direction of the trend.

Deviations from these patterns were warning signals and, if confirmed by price movements back through pivotal points, indicated that exited or unrealized profits should be taken.

Timing the Market
Any trader knows that being right a little too early or a little too late can be as detrimental as simply being wrong. Timing is crucial in the financial markets, and nothing provides better timing than price itself. The pivotal points mentioned above occur in individual stocks and market indexes, as well. Let price confirm the trade before entering large positions.

Jesse Livermore believed no matter how much we “feel” that we know what is happening, we need to wait for the market to confirm our thesis. And only when it does do we make our trades – and we must do so promptly.

Trading Rules
The trading rules that follow are simple, and have been included in many trading plans by many traders since they were created nearly a century ago. They are still valid today, and were created under Jesse’s truism: “There is nothing new in Wall Street. There can’t be, because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.”

  • Trade with the trend. Buy in a bull market, short in a bear market.
  • Don’t trade when there aren’t clear opportunities.
  • Trade using the pivotal points. (Learn how to spot the pivot point from which a new movement will emerge;
  • Wait for the market to confirm opinion before entering. Patience leads to “the big money.”
  • Let profits run. Close trades that show a loss (good trades generally show profit right away).
  • Trade with a stop, and know it before you enter.
  • Exit trades where the prospect of further profits is remote (trend is over or waning).
  • Trade the leading stocks in each sector; trade the strongest stocks in a bull market, or the weakest stocks in a bear market.
  • Don’t average down a losing position.
  • Don’t meet a margin call; close the position instead.
  • Don’t follow too many stocks.

Summing Up Jesse Livermore’s Strategy
Jesse was highly successful, but also lost his fortune several times. He was always the first to admit when he made a mistake, and when he lost money it came down to two potential culprits:

  1. The rules for trading were not fully formulated (not the case for most of his losses).
  2. The rules were not followed.

For today’s trader, these are still likely the culprits that keep profits at bay. To be profitable, we must actually create a profitable trading system, and then we must adhere to it in actual trading.
Jesse outlined a simple trading system for us: wait for pivotal points before entering a trade. When the points come into play, trade them using a buffer, trading in the direction of the overall market. Let the price dictate our actions and stay with profitable trades, until there is good reason to exit the trade. Losses should be small and trading should be avoided when there are no clear opportunities. When there are trading opportunities, trade stocks that are most likely to move the most.

 

Posted on

Michael S. Jenkins

Michael S. Jenkins

Michael S. Jenkins was born in Schenectady, N.Y. on March 12, 1949. He studied economics and business administration at Washington & Lee University and graduated with a B.S. in Commerce in 1971. In 1975 he received an MBA from George Mason University. In 1976 he passed the Uniform CPA examination. Mr. Jenkins has worked in bank trust departments as a portfolio manager, ran three mutual funds and was in the top ten managers in the world in the late 70’s and early 80’s. In 1984 he moved to NYC to become a professional trader for a number of NYSE Specialist firms. In the past, he has been licensed as a stockbroker, commodity broker, hedge fund manager, and investment advisor. In 1985 he founded the Stock Cycles Forecast investment newsletter which has correctly called almost every major bull and bear market turn in the past 25 years including the 1987 crash, the 1990 break, the year 2000 bear market and its exact lows in 2002 and 2003, and recently predicted the final top in 2007 within two days. Because of this notoriety he was a weekly guest on CNBC for 12 years and is the frequent subject of magazine articles on trading and technical analysis. He has written four books and two courses on professional stock market trading and is considered an authority on cycles in the economy and the stock market.

He has written five best selling books on professional trading as well as a Complete Stock Market Trading and Forecasting Course and a Secret Angle Trading Method, and the new revolutionary Square the Range Trading System and three Gann Planetary Volumes. Mr Jenkins also does personal training and teaches the esoteric secrets of the W.D. Gann methodology.

 

Posted on

Raymond A. Merriman

Raymond A. Merriman

Raymond A. Merriman is the President of the Merriman Market Analyst, Inc and founder of the Merriman Market Timing Academy. He is a Commodities Trading Advisor (CTA), financial market analyst, and editor of the MMA Cycles Report, a monthly market advisory newsletter that specializes in stocks, interest rates, currencies, precious metals, crude oil and soybeans since 1982.

Merriman’s formal education includes a Bachelor of Arts degree in Psychology at Michigan State University in 1969. He did post-graduate studies in Psychology at Michigan State University and Oakland University, 1969-1971, before taking on a position as a project coordinator for an adolescent group program with the Michigan Department of Social Services, where he developed a group counseling model known as “RGD” (Reference Group Dynamics). This model was later adopted by high schools in Ohio and Michigan in the 1970’s.

His introduction to financial markets began in 1978. Two years later, he became a student of Walter Bressert, legendary cycles analyst in commodities from Tucson, Arizona. Under Walter’s tutelage, Merriman began his research in the correlation of planetary cycles to cycles in the Gold market, based on Walter’s methodology of cycles analysis, which resulted in the publication of “The Gold Book: Geocosmic Correlations to Gold Price Cycles,” in 1982 (out-of-print). This was the first book to show a quantitative research correlation between cycles in a financial market to cycles in the cosmos.

Between 1982-1986, Merriman was a frequent guest contributor on the Financial News Network (FNN). He served as an Investment Executive with Prudential Securities (1986-87) and Shearson Lehman Hutton (1987-1990), before becoming an Accounts Vice-President of Retail Commodity Futures with Paine Webber (1990-1994). He also authored several books on Financial Market Timing, including the five-part series on The Ultimate Book on Stock Market Timing (written 1997-2012), The Sun, Moon, and Silver Market (2006), and the annual Forecast Book (since 1976), which outlines his projections a year ahead of time for financial markets, the world economy, and political trends.

In addition, he has also written two primers on financial market analysis. One, titled Merriman on Market Cycles: The Basics, first published in 1994, is a classic primer on cycle studies. The other, Basic Principles of Geocosmic Studies for Financial Market Timing, is a basic textbook on the relationship of geocosmic correlations to financial markets.

From 1997 through 2011, he wrote the five volume series on The Ultimate Book on Stock Market Timing, which became the basis for the curriculum used in MMTA, the Merriman Market Timing Academy. In all, these  books took 14 years to complete and comprised over 1600 pages.

In late 2015, his research on Solar/Lunar Correlations to Gold Price Reversals: Secrets of a Gold Trader, was published. His works are currently published in German, Italian, Dutch, French, Russian, Serbian, Czech, Vietnamese, Japanese, and, of course, English.

In 2013, he created the MMTA, the Merriman Market Timing Academy, a two-year training course in Merriman’s market analysis and market timing methodology developed over the past 30 years. Students took 99 classes in this two-year period, plus several competency tests, and completed papers on seven major research projects identifying historical correlations between the analysis methods and historical performance.

In early 2013, Merriman was awarded the Gold Star by Market Timing Digest of Amsterdam, Netherlands as the “Best Market Timer of 2013.” He was the only contestant (of twelve who were followed) to successfully identify all 15 major turning points in the U.S. stock market by their criteria. By contrast, the second-place finisher successfully identified 12. In 2014, Merriman received the Gold Star award again as “Best Market Timer of the Year” from Market Timing Digest, this time correctly identifying 20 of 21 reversal dates in the U.S stock market well ahead of time.

Merriman is also well-studied in the field of Astrology. He is a Professional (Certified) Life Member of the American Federation of Astrologers (PLMAFA since 1972), as well as through ISAR, the International Society of Astrological Research (2000). In 1995 he was the recipient of the UAC Regulus Award for “Enhancing Astrology’s Image As a Profession.” in 2012, he received the UAC “Regulus Lifetime Achievement Award,” only the fourth person ever to receive this honor.