The Course Syllabus for 2006. Differences will occur from year to year.
Course Title: Building Effective Trading Systems
FI498S
May -August --Wednesday 4-6:40 p.m. Two Saturdays scheduled at convenience of class And Individual tutorial possible
Instructor: W.H.C. Bassetti, Adjunct Professor, Ageno School of Business
Purpose of Course: Prepare students to trade effectively and profitably
Attendees will:
* Experience working with various tools and methodologies of technical analysis-- qualitative, interpretive and number driven, and learn their strengths and weaknesses.
* Understand the necessary components, tactics and strategy of a technically oriented trading or investment plan, including portfolio management and risk management.
* Learn to construct and test a trading system.
* Understand how to use classical chart analysis to evaluate all methodologies.
* Engage in analysis and paper trading cases from present markets.
Course Description:
This course starts with a brief intensive review of technical analysis as practiced by Magee oriented analysts (classical chart analysis). This review is followed by cursory presentation of the most commonly used numerical technical analysis tools. Subsequently the course moves to consideration of interpretive and other sophisticated methods. Thus the course moves from chart and trend analysis through some selected number driven technical analysis tools to explanation of interpretive tools (Candlesticks). Operation of each method and its advantages and disadvantages is discussed. A brief illustration of these tools integrated into tactics and strategy is also presented. Primary subjects of case study and exercise are stocks. Commodities will occasionally be referenced.
Various trading systems will be examined and each student will construct his own system.
Several market wizards visited with the class for unstructured conversations in question and answer sessions in previous courses, and it is hoped that they will be able to return for the 2002 course. The class will also spend a modicum of optional time after some sessions discussing current markets and student portfolios and trades.
Course Requirements:
1. Attendance and participation
2. Preparation and testing of a trading system and presentation to class
3. Completion of assignments
Grading
1. Attendance and participation 15%
2. Preparation and testing of a trading system 30%
3. Project presentation 10%
5. Completion of assignments 30%
6. Actual paper trading project 15%
Course Texts: Schwager on Futures--Technical Analysis Schwager (ISBN 0-471-02051-6)
Technical Analysis of Stock Trends, 8th Edition Edwards & Magee & Bassetti
(Instructor will make this available to students at a discount)
Recommended Reading:
Analyzing Bar Charts for Profit Magee
New Market Wizards Schwager
Course Outline
Course will cover areas from this outline (to cover all in depth would be impossible) chosen by students in consultation with instructor
0. First phase--introduction
a. Course infrastructure, meetings grades requirements, schedules
a.1. Course purpose and core course assignment: build trading system
b. First assignment--prepare present portfolio analysis
0.1 Exercises on stocks which will be basis of many course studies (blind)
a. First pass--Chart alone
b. Second pass--Chart with Moving averages
c. Third pass--Chart with other technical indicators perhaps Bollinger Bands and crossover moving averages
0.2 Investigation of results of Exercise
0.3 Computer systems and tools of course
1. A Review of the work of Edwards and Magee and foundation of technical analysis.
1.0.1 Dow Theory, philosophical and theoretical context of technical analysis
a. Learning to read Chinese--Charts, ideograms or patterns--the language of the market
b. Nomenclature of charts and technical analysis
c. Trend identification
i. Nature and character
ii. Treatment of in real world
a) 103 year record of buying and selling on Dow signals
1.1 Trends
1.1.1 Support and resistance
1.2 Continuation patterns
1.3 Reversal patterns
1.4 Volume and open Interest
2. Elementary and advanced Mandarin--Review of life of a market, birth to death, bull to bear with
a. Examination of theoretical pure forms and patterns
b. Examination of patterns in actual cases from the market
2.1 Patterns of Accumulation--Bottoms
a Kilroy patterns Upside down heads and shoulders
b. Vs
c. Doubles, Triples
d. Rare reversals
2.2. Continuations
a. Flags and pennants
b. Ascending triangles, rectangles
c. Wedges triangles
2.3. Patterns of Distribution and climax
a. V tops
b. Double, triple, head and shoulders
c. Rectangles, Diamonds, saucers
d. Gaps, blow offs, islands
.
2.4. Post top patterns
a. Flags, pennants, symmetrical coils
b. Wedges, descending triangles
3. Tactics and strategy
a. Dependable investment techniques derived from Magee 's methods and technical analysis--an organic system and practice
b. The winnable game
c. Some trading strategies used by prominent traders--
i. Dreiss, Niederhoffer, Commodity Investment Service
ii. Blair Hull, Richartz
4. The use of Magee s methods in other markets.
4.1 Basic application of Magee technical analysis to the futures markets
4.2 The essential differences between stocks, bonds, futures, derivatives
4.2.1 Behavioristic markets, model driven markets, short life markets, supply demand markets
4.2.2 Comparative characteristics of markets
2.2.2.1 Derivatives, Fixed income, currencies, commodities
4.3 Critical evaluation of the use of Magee techniques in other markets
4.4 How the method has fared in actual trading
4.4.1 Dreiss, von Waldburg, Issacson
4.5. The present and future use of Magee methods
4.5.1 Use of Magee analysis to gain perspective on number driven systems
5. The Computer Toolbox
5.1 Software for technical analysis and trading systems
5.2 Use of computers and databases for research
5.2.1 Principles of scientific research
5.3 Use of the internet for research and trading.
6. Number driven technical analysis methods and systems
6.1 A general critical perspective on number driven methods
6.1.1 Trending systems and trading systems--Traders, Trenders and Contrary Opinionists
6.2 Tool chest of number driven technical analysis
6.2.1 Moving averages and relations and off shoots
6.2.2 Oscillators and related methods
6.3 How some of these systems have performed in actual trading
6.3.1 Dreiss, Wieckowicz, the Turtles, Larry Williams, Niederhoffer
7. Interpretative and other Methods
7.1 Cycles
7.2 Wyckoff
7.3 Haruspication
7.5 Candlesticks
7.6 Critical evaluation of real life performance and usefulness of these methods.
7.6.1 Robert Prechter
7.6.2 Niederhoffer
8. Point and Figure Charting
8.1 Explanation and illustration of
8.2 Performance of P&F advisors in actual trading
9. Critical Overview
9.1 Criteria for effective trading methods--general standards and principles
9.1.1 Quantitative evaluation using actual data
9.1.2 Sharpe ratio and other tools
9.1.3 Where systems fail or succeed, and why-- the 98% rule
9.1.4 A method for evaluating systems and trading practices
9.2 All methods evaluated, discretely, and against each other
9.2.1 The common characteristics of successful systems
9.3 How some traders have solved the problems defined by these criteria of effective trading
10. Putting it all together
a. Summation, retrospective
b. Nature and character of practice as a technical analyst
c. A program for continuing study of the practice
1. Reading list discussed
2. Software and tools discussed
11. The secret of success in the markets--of golf--of life
a. How a technician manages the tulip market
b. How to play the game you can win
b. Lee Richartz: "Never be in a hurry to do something stupid."
12. Conclusions--
9.1 Bacon's law--when the method becomes the paradigm
9.2 The present and future application of technical analysis
9.3 Guiding principles for users of Technical Analysis
About the Instructor:
W.H.C. Bassetti became a student and client of John Magee in the '60s. He graduated with honors from Harvard and has been an Instructor in the Finance Department at the University of California, Berkeley, Extension Division. Formerly a registered Commodity Trading Advisor he was a principal in California s first licensed commodity advisor, Commodity Investment Service, Inc. Subsequently he was CEO of Options Research Inc, the first company to computerize the analysis of options and futures. At Options Research Group his companies managed derivatives arbitrage capital and were market makers on the Pacific Stock Exchange Options Floor. He is currently President of Micro Options Research Inc, a sometime joint venture partner of Standard & Poor s and Telekurs, and furnisher of options and futures analytics software to Prudential Securities. He is the Editor of the works of John Magee: Winning the Mental Game on Wall Street, and the co-author of the 8th Edition of the definitive work on chart analysis, Edwards and Magee's Technical Analysis of Stock Trends and the 2nd Edition of Analyzing Bar Charts for Profit, now titled Introduction to the Magee System of Technical Analysis.
