DollarLink News -- October 29, 1994

High-Probability Trading System

We have added a high-probability probability system for commodities. The system is based on observations by several experienced and "famous" traders. It has also been mentioned by Vic Sperandeo in his book Trader Vic.

Normally we don't get involved with trading systems because most of them have not been statistically backtested and confirmed. However, this one is supported by high probability historical statistics and is rather easy to use.

What the traders have observed is the following:

If the contract closes up for the day and if it closes within the upper 10% of the true range (*), then the probability of the contract exceeding this closing on the next day is between 75% and 90% depending on the contract. Also, the probability is between 70% and 85% that it will exceed today's high sometime tomorrow.

Similarly, on the down side, if the contract closes down for the day and if it closes within the lower 10% of the true range, the probability is between 70% and 90% that it will go below this close tomorrow. Also, the probability is between 70% and 85% that it will go below today's low sometime tomorrow.

These probabilities have been researched and confirmed on all types of commodities for the past 14 years. See Technical Analysis of Stocks & Commodities magazine (Oct. 1994, Interview with Steve Moore, page 74).

Please note that the system says nothing about tomorrow's high/low and tomorrow's close. It does not say whether the contract will close higher or lower tomorrow. All it says is that sometime tomorrow chances are very good that during the trading session the contract will be higher/lower that today's high/low or close.

It is interesting to note that we backtested this system for stocks and it does not work. Perhaps it has to do with the way markets are conducted (open outcry for commodities versus the specialist/market makers for stocks) and/or perhaps stocks usually don't move that much during the trading day.

How to Use?

Press P (Portfolio) and then G (Gaps) while in text mode. Then choose H (High Chance). DollarLink will go through all your commodities and produce a high-chance list. You can view this list, print it or save it as a file called HICHANCE.TXT. Also, DollarLink puts up a U or D (for Up or Down) to the right of the time stamp for the relevant contract.

If you perform this search after the close of all commodities, the list will be based on how the commodities closed today. If you do it during the trading day, it will be based on yesterday's close. In other words, it will use the latest closing prices available.

(*) True range is defined as the difference between true high and true low. True high is defined here as the highest of today's high and yesterday's close. True low is defined as the lowest of today's low and yesterday's close.

Reading and Printing Text Files

Here is a function we probably should have added to DollarLink a long time ago:

DollarLink can now view/read (or search for a keyword) any text file on the hard disk and print a text file. From the basic text mode, press C (Control), D (DOS), V (View) and then enter the file name to view/search the file. Press C (Control), D (DOS), P (Print) and then enter the file name to print out the file.

Warning: the files must be text (pure ASCII), otherwise the PC may crash.

Updates Policy

Updates are yours for the asking, except for those customers who bought DollarLink but have not paid the annual support & upgrades fee. The updates always have the latest manual included as a file on disk; new printed manuals are available for $20 to cover production and shipping costs.

Gobble, Gobble

DollarLink will be closed Thanksgiving Day, Thursday, November 24, and Friday, November 25.

Thanks and have a happy and healthy Turkey Day from everyone at DollarLink!

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