The swiss

technical
A n a ly s i s
Journal

Sommer
Herbst
Autunno
estate
Automne
été
Summer
Autumn
2013

The Swiss Association of Market Technicians

GenÈvE • Lugano • ZÜrich

 • Summer 2013 • The Swiss Technical Analysis Journal
 l Zürich

Willkom m e n
Benvenuto
Bienvenue
Welcome l Genève

l Lugano

From the President’s Desk
Dear SAMT members & industry colleagues
The first launch edition of “The Swiss Technical Analysis Journal” was a
great success.
I would like to express my thanks to everyone involved with the SAMT
Journal and to the growing support that we are receiving from the local and
international financial community. It is our intention to publish
the Journal three times per year.
Since the last publication in spring 2013, there were plenty of
events across Switzerland, featuring a range of interesting technical
and market-related topics. The year of 2013 is proving to be a very
active one across each of our SAMT tri-lingual chapters; within the
Zürich (German), Geneva (French) and Lugano (Italian) regions.
Our regional chapter heads do a really great job of organizing
plenty of interesting events and they are willing to continue to
build even more value for our SAMT members. Moreover, SAMT’s
true strength is based on the growth and strength of its members and I wish
to congratulate everyone that has achieved their CFTe diploma after the
recent examinations, and also Jean-François Owczarzak for winning the
prestigious Bronwen Wood Prize.
We are very proud of our SAMT member achievements and wish them
much success with their future aspirations.
Yours sincerely,

Daniel
Daniel Stillhart,
President of the Swiss Association of Market Technicians (SAMT)

The Swiss Technical Analysis Journal • Summer 2013 • 

 SAMT
Chapters
and
programmes

chapter meeting general information

Geneva - Swiss French Chapter

The Swiss French chapter meetings are co-ordinated by
Ron William, Mobile: + 41 78 947 53 87 ronwilliamPR@gmail.com
Meeting location is often: Bloomberg | Rue du Marche 40 | 1204-Geneva Time: 17:45-20:00

Lugano - Swiss Italian Chapter

The Swiss Italian chapter meetings are co-ordinated by
Alberto Vivanti, Tel. + 41 91 966 11 67 vivanalysis@bluewin.ch
Mario Valentino Guffanti, Tel. + 39 33 691 91 70 mario@guffanti.net
Meeting location is near Lugano:
Centro di Studi Bancari | Villa Negroni | 6943-Vezia (accessible by bus line #5). Time: 17:00-18:30

Zürich - Swiss German Chapter

The Swiss German chapter meetings are co-ordinated by
Daniel Stillhart, Tel. +41 79 692 52 92 daniel.stillhart@frankfurterbankgesel-lschaft.ch
Patrick Pfister, Tel. +41 76 588 76 79 trading_patrick@yahoo.com
Meeting location is generally: Hotel City | Löwenstrasse 34 | 8001-Zürich Time: 18:00-19:00

2013 Summer Programme Calendar

Tuesday, 9 July Geneva Chapter Monthly Meeting

FinGraphs.com: Markets Made Easy
Jean-François Owczarczak, CFTe, Management Joint Trust, S.A., Geneva
Location: Hôtel Bristol Genève | 10, rue du Mont-Blanc | 1201-Geneva Time: 17:45-20:00

Tuesday, 17 September Geneva Chapter Monthly Meeting

Katie Stockton, CMT, Chief Market Strategist, MKM Partners, Stamford, CT USA
Location: Bloomberg | Rue du Marche 40 | 1204-Geneva Time: 17:45-20:00

September (date to be anounced) Lugano Member Evening and Dinner

Location: to be announced

 • Summer 2013 • The Swiss Technical Analysis Journal

 The swiss
technical
Analysis
Journal
Contents
From the President’s desk
Daniel Stillhart 3
Volume One, Issue 2
The Swiss association of market technicians
Summer 2013 Chapters and Programmes 4

Panel discussion featuring Robert Prechter &

Martin Pring
Journal Committee Ron William, CMT, MSTA 7

Mario V. Guffanti, CFTe A Book Review & Interview with Perry Kaufman
+ 39 33 691 91 70 Mario Valentino Guffanti, CFTe 11
mario@guffanti.net
Cusp Catastrophe Theory:
A Model for Technical Analysis
Ron William, CMT, MSTA
+ 41 78 947 53 87 Hank Pruden, Ph.D. 17
ronwilliamPR@gmail.com SmartView Model
Alessandro Angeli, CFTe, MFTA 21
Design & Production
Barbara Gomperts The Volatility-Based Envelopes (VBE):
+1 978-745-5944 (USA) a dynamic adaptation to fixed width moving average envelopes
bgomperts@gmail.com Mohamed El Saiid, MFTA 27

Markets made easy

Jean-François Owczarczak, CFTe 33
Follow SAMT on
The Swiss association of market technicians
SAMT Achievers 37

Board of Directors 39

Journal Submission Guidelines and Advertising Rates 40

Membership 41

Education 42

Partner Societies 43

The Swiss Association of Market Technicians (SAMT) is a not-for-profit organization that does not hold a Swiss Financial Services License. It is the aim of the SAMT to promote the theory and practice of
The Swiss Association technical analysis, and to assist members in becoming more knowledgeable and competent technical analysts, through meetings and encouraging the interchange of materials, ideas and information. In
furthering its aims the SAMT offers general material and information through its publications and other media.

of Market Technicians The information provided on this Journal has been compiled for your convenience and made available for general personal use only.
SAMT makes no warranties implied or expressly, as to the accuracy or completeness of any information contained on the Journal. The SAMT directors, affiliates, officers, employees, agents, contractors,
successors and assigns, will not accept any liability for any loss, damage or other injury resulting from its use.
SAMT does not accept any liability for any investment decisions made on the basis of this information, nor any errors or omissions on the Journal. This Journal does not constitute financial advice and should
GenÈvE • Lugano • ZÜrich not be taken as such. SAMT urges you to obtain professional advice before proceeding with any investment.
The material may include views and statements of third parties, which do not necessarily reflect the views of the SAMT. Information on this Journal is maintained by the people and organization to which it
relates. The SAMT believes that the material contained on this Journal is based on the information from sources that are considered reliable. Although all care has been taken to ensure the material contained
on this Journal is based on sources considered reliable we take no responsibility for the relevance and accuracy of this information.
www.samt-org.ch Before relying or acting on the material, users should independently verify its accuracy, currency, completeness and relevance for their purposes.
 Conference Location
InterContinental Mark Hopkins San Francisco
One Nob Hill, San Francisco, CA USA
Reservations
+1 415.392.3434 (Group Code: QS9)
Reservation Deadline: Monday, 9 September 2013

Room Rates
Single Bed & Breakfast (one person): USD $307/night
Double Bed & Breakfast (two people): USD $344night

Sponsorship Opportunities
Benefits of Sponsoring:
• Distinguishing your product in the marketplace
• Developing new contacts
• Feedback on brand
• Networking & cross promotion
• Personal access to a target audience

More details available on the IFTA conference website.

 • Summer 2013 • The Swiss Technical Analysis Journal

How will the
NEXT few years be
characterized?
Inflation, Deflation or both?
Panel discussion featuring Robert Prechter, CMT,
President of Elliott Wave International & Martin Pring, Chairman
of Pring Turner Capital, moderated by Ron William, CMT, MSTA,
Founder & Principal Strategist of RW Market Advisory
During the annual symposium of
the Market Technicians Association,
April 2013, two of the world’s most
renowned veteran market technicians,
Robert Prechter, CMT, President of
Elliott Wave International and Martin
Pring, Chairman of Pring Turner
Capital, shared their key insights
during a moderated panel discussion
with Ron William, CMT, MSTA,
Founder & Principal Market Strategist
of RW Market Advisory, on one of
today’s most widely debated questions
about Inflation & Deflation pressures
and how both risk scenarios would
impact your investment decisions and
portfolio returns. Please select link to
review the full online video.
The Swiss Technical Analysis Journal • Summer 2013 • 
Ron William: What is the best strategy to
help preserve capital given your stances
on either of the inflationary or deflationary
pressures ahead?
Martin Pring: Our firm (Pring Turner
Capital) has just come out with a new ETF
(The AdvisorShares Pring Turner Business
Cycle ETF) (DBIZ) and I think that would
be the place to go. In the past, obviously,
being long commodities has been a good
place to be or commodity resource-based
stocks or basic industry stocks have also
been good places to overcome inflationary
trends. So I see no reason why they wouldn’t
still be a good idea.
Robert Prechter: I think it’s extremely
hard to preserve capital. With the
abandonment of real money in the
monetary system, it’s become nearly
impossible to be a quiet little saver,
because wherever you put your money
other people are going to get their hands
on it. Or it’s possibly going to disappear
overnight. So it’s one of the hardest
tasks in the world. That’s why one of the
things that I have been recommending in
the past few years is actual cash. I mean
cash stored away in a nice safe place or in
multiple safe places. I think it’s going to
become very handy.
Gold is the only real money. I believe
Bitcoins will become real money
eventually, but it’s gold at the moment.
Gold, however, is extremely overpriced
and overvalued in my view, and I don’t
think it’s a good buy at this time. Of
course, I didn’t see it going this high in
the first place. Still, I think we will have
another buying opportunity for gold later
on, when everything bottoms.
Preserving capital is kind of tough. You
might decide to have cash in different
currencies such as the Swiss franc. But
the world is always changing and we are
always keeping our eyes open for where
the dangers can be. As we saw in Cyprus,
even if someone had a million Euros in
cash stashed away, suddenly they couldn’t
transport it out of the country.
In some of the countries that I mentioned
earlier such as Norway, France and
Sweden, they are talking about making
it illegal to spend more than a thousand
Euros in one transaction. So there are so
many ways that your prudence can be
thwarted. It’s a very difficult environment
to preserve capital.
RW: Switching to the currency world,
there is a growing debate on how either
inflationary or deflationary pressures are
likely to affect on the US dollar. What is
your current view on the US dollar and
how do you see that trend playing out?
MP: Well as I highlighted in my
presentation, on monthly charts, the US
dollar looks very strong here. I did an
exercise last month looking at the long-
term momentum of all the principal cross
rates including the Euro, the Japanese yen,
the Canadian dollar, the Australian dollar
and the British pound and they all favoured
the US dollar on a long-term basis. So it
seems to me that the proof is the US dollar
is likely to move up, not as I said before,
because it’s a great currency, but because
all the others are so much worse.
RP: I agree with Martin on this and the or more specifically, between the years
way that he put it in his speech is exactly of 1929-1931 can be pretty violent. So
right. When we look at the dollar index those are two of the key determinants of
we are not looking at the purchasing yield on a long-term basis.
power of the dollar, we are only looking RP: I think yields will go up if we have
at the dollar’s performance related to inflation, surely, and I believe they will
other currencies. So my opinion about go up if we have severe deflation for
the question is, which currency is likely the reasons that I went over. In fact,
to be deflating the most? That’s the one when Greece went through its period of
that is likely to go up more, because as austerity, rates soared into double digits.
debt starts to dissolve and disappear, That’s the type of risk you have within
remaining dollars and euros will be more a deflationary environment. It sucks
valuable. That’s why cash is always worth buying power from all the other places
something in a deflationary situation. like a black hole.
Despite this factor, One thing to keep
my shop has been
“The history of [interest] rates is that they in mind is that the
bullish on the dollar Federal government
index for quite are tied into two things; one is the amount currently pays
some time, mostly of commodity or CPI inflation... Then of
out about 6% of
because of the very course, the other one becomes the credit
its budget just to
aggressive number default risk and if that becomes pretty high, cover interest. So if
of vocal bets against then that will send up rates too. But that
Treasury rates start
it, all the people who tends to be more of a temporary thing, rather to go up, it would
have been saying the than a [long-term] trend driver. But still, be a really bad sign
US dollar is likely to even those temporary moves as we saw in for the budget.
crash, or it’s going the 1930s, or more specifically, between the
to zero, thanks to years of 1929-1931 can be pretty violent.” RW: The next
the US Federal - Martin Pring question, on the
Reserve. We felt that current US stock
was an impossible market outlook,
psychology for a continuing falling is probably one that I received the
dollar. We don’t think the bull market is most number of requests [from leading
institutional representatives and many
over yet; it still has a long way to go. MTA symposium delegates]. The US
stock market has recently posted new
RW: One of the interesting points in
all-time highs, driven by relatively strong
both of your presentations was the
breadth and a historically strong four-
similar perspectives on long-term
year cyclical recovery. How sustainable is
US Government yields, suggesting
the current bull-trend and what parallels
an exhaustion and potential (upside)
may exist from prior secular bear trends,
reversal, in terms of both the cyclical and
notably the 1973 peak, which many
secular trend. Can I ask the both of you
industry analysts are highlighting as a
about the potential psychological drivers
potential road map template.
behind that within either an inflationary of
deflationary cycle? MP: I don’t know because my work does
MP: The history of rates is that they are not forecast magnitude or duration of
tied to two things; one is the amount trends, unless I have a price pattern or
of commodity or CPI inflation that something similar that would just give
takes place which is about the closest me an objective. All I can do is follow the
correlation that you can come to on any direction of the indicators and right now
particular relationship with bond yields. my longer-term indicators, the ones that
Then of course, the other one becomes measure the primary trend, the majority
the credit default risk and if that becomes of them are suggesting that prices are
pretty high, then that will send rates going to go higher and the trend is up.
up, too. But that tends to be more of a One of the really strong characteristics of
temporary thing, rather than a [long- a typical bull market in stocks is usually
term] trend driver. But still, even those when short-term interest rates start to
temporary moves as we saw in the 1930s, move up and as we know the Fed had

 • Summer 2013 • The Swiss Technical Analysis Journal

kept rates down to zero and so we don’t RW: What about the psychology in prior
have a sign of a top at this point. secular bear markets? What key lessons
are important and are there any parallels
So I can’t tell how far it’s going or when that we should be aware of for now and
it’s going to get there, all I can say is that the eventual endgame of a secular bear
right now all my indicators are bullish and market?
therefore I am bullish, notwithstanding MP: Well having said that I am bullish
a short-term correction, obviously. But on the primary trend, of course, my work
until that stuff starts to turn, I’ve got to suggests that we are still in a secular bear
stay bullish. I’ve learnt the lesson the hard market for inflation-adjusted stocks. We
way, that if I tell the markets what to do, are still about 20% from the peak in the
then I am usually wrong and end up with S&P 500, so we could still see a 20%
blood on my face. rise and still remain with a secular bear
RP: Well I should have learnt more market or trading range.
lessons the hard way, but I can tell you flat The things that I’m looking for to
out that I am as bearish as I can possibly suggest that I am seeing an end to the
be in studying 200 secular movement,
years – well 300 or a downward
years really when When Frost and I wrote our book way back movement in real-
you throw in Britain in 1978, we said there is a big bull market adjusted rates in
– of stock price coming and it’s going to lead to what we
stocks, would be
movements. This called grand super cycle top, and I think the
things like the S&P/
is one of the most fact that we have had these multiple manias Case-Shiller price
amazing junctures is a reflection of that model working. For
earnings ratio which
that I have ever seen. example, in 2000 we had the all-time high typically registers to
Now, I felt the same in the NASDAQ; you know, that’s the only a number of 6 times
way in 2000 and the index that rose a hundred times, just like at the end of a bear
same way in 2007. margin debt did. In 2006, 2007 and 2008 market, yields on
In fact, I couldn’t we had three manias packed in together. the S&P 500 are
believe investors got We had the peak in real estate in 2006, usually 6-7%, they
a second chance, we had stocks in 2007 and commodities in are currently 2-3%
much less this third 2008, packed together very closely. - Robert and currently the
one. In the decline Prechter Shiller ratio is about
of 2009, how many 23 times.
people said “Oh if I
could just get to breakeven, I would get Moreover, the Tobin
out of the market”. Well okay, now they Q ratio which measures the replacement
are more than breaking even, but are they value of stocks typically peaks at a secular
getting out of the market? peak at $1.15 or something like that and
ends the secular bear at around $.30. Last
We just had a record in January of inflows I saw about three or four months ago it was
into mutual funds, and the last time it about $.80. So I would be looking for a lot
was that high was during September- of these fundamental indicators, which I
October of 2007. So for the third time really regard as sentiment indicators, to
we have had peak indications within the be moving to those extremes.
stock mania. I think we are setting up,
for the first time, a reversal in all three RP: I agree 100% with that. We have not
markets: stocks, commodities and bonds. seen a classic bear market low since 1982,
So I think that we have a triple whammy which is the last time those figures where
coming up. I certainly would not want to in bear market bottom territory. We also
own anything. I think it’s pretty safe to be saw them in 1974, 1942 and 1949, which
short, personally. But I have been wrong were all great buying opportunities.
plenty of times, so please don’t do what I We have seen nothing like them. There
tell you to do. have been no corrections worthy of a
major bear market low. We got a nice
panic in 2008-2009, but it was from really
high levels, and some of the indicators

The Swiss Technical Analysis Journal • Summer 2013 • 

that I showed you never even corrected
from the high of extreme optimism and
extreme complacency. But it’s coming
up. You know, markets go up and they go
down, and the world is never going to be
a place where we are always optimistic or
always pessimistic.
When Frost and I wrote our book way
back in 1978, we said there is a big bull
market coming and it’s going to lead to
what we called grand super cycle top, and
I think the fact that we have had these
multiple manias is a reflection of that
model working. For example, in 2000 we
had the all-time high in the NASDAQ;
you know, that’s the only index that rose
a hundred times, just like margin debt
did. In 2006, 2007 and 2008 we had
three manias packed in together. We had
the peak in real estate in 2006, we had
stocks in 2007 and commodities in 2008,
packed together very closely.
This time gold made a new all-time high
along with stocks. Stocks have continued
for another year, but I still think that this
is a lagging sort of exhaustion move. With
new highs peaking last year, I think that’s
the beginning of the end, the beginning
of the turn downward. But we will see.
We have seen things stretch farther than
normal, twice already. As I have said
several times, maybe hedge funds will go
from thirty times leverage to a hundred
and fifty times leverage. Who knows?
RW: A question in line with the title
“Inflation, Deflation or Both?” What
are each of your views on the potential
fusion (or duality) between inflation and
deflation? Part of this will be down to
timing (i.e. long-term structural deflation,
interrupted by short periods of cyclical
inflation or vice versa).
MP: We have the cycles that alternate
between inflation and deflation. In fact,
inflation breeds its own deflation, because
if you have a huge run up in commodity
prices for example, that means oil and
food prices go up and that sucks out
purchasing power and also pushes up
interest rates, causing the economy to
correct. So I believe that it’s a transitional
continuation of the two. The only thing
different is the degree that happens in
each cycle.
10 • Summer 2013 • The Swiss Technical Analysis Journal
RP: I’m pretty much in agreement. I
think that we started to see a change to
deflationary psychology between 2000
and 2006 on a very long-term basis. It
takes time for these things to develop.
People talk about austerity. You know the
Federal government is even scaling back
its budget by a small amount. They are
arguing about it, and that’s something
new. The psychology is slowly seeping to
another side of the ledger.
On a short-term basis, yes, it is cyclical.
Between 2006 and 2008 we had deflation.
Since 2009 we’ve had a reflationary trend,
and that’s the one that I think has lost its
upside momentum. It hasn’t quite rolled
over in the US, but it has already rolled
over in Europe. Now that the cyclical is
joining the secular its looks like a very
interesting time in the years ahead.
RW: On a final note, I would like to ask
Robert Prechter if he could kindly share
a few words of insight on the study of
Socionomics and its focus on causality
ahead of your up and coming annual
conference.
RP: [“Socionomics is the study of
social action that expresses social mood.
Social mood arises endogenously from
unconscious herding impulses inherited
through evolution, and is patterned Investing in the Second Lost
according to the Wave Principle”]. The Decade by Martin J. Pring, Joe D.
following week we have our third annual Turner & Tom J. Kopas
Social Mood Conference in Atlanta, Part One & Part Two Video Series
Georgia. that accompany the book.
It’s a great gathering of minds, really Conquer the Crash: You
brilliant people, from academia to the Can Survive and Prosper in a
professions. It is one long day with 12 Deflationary Depression
by Robert R. Prechter, Jr.
different speakers. We discuss social mood The world’s few deflationists:
and the effect of social mood on markets,
www.deflation.com
culture and society. So come join us if
you can. Look it up on the web for more Financial and Socionomic Theory,
information at www.socionomics.net new DVD: “Robert Prechter at
(Read more: Socionomics Explained and Oxford, Cambridge and Trinity”;
follow on Twitter: @Socionomics). read about it at
www.socionomics.net
To contact the moderator of this
interview:
Ron William, CMT, MSTA
Email: ronwilliamPR@gmail.com
Website: www.ronwilliam.com
Book Review
Title: Trading Systems and Methods (Fifth Edition)
Author: Perry J. Kaufman
Publisher and date: John Wiley & Sons – NJ – Jan 2013 – 1,212 pages

A Book Review & Interview

with Perry Kaufman
Mario Valentino Guffanti, CFTe

The Review
The term “heretics” of finance was the nickname for technical analysts coined by Professor
1

Andrew Lo, based on the fact that the academic world, at the beginning, saw technical analysis
as a sort of alchemy and thought that technical analysis was to financial analysis as astrology
was to astronomy. Despite these first historical misgivings, a high number of academics have
studied technical analysis and have come to several interesting conclusions regarding its benefits
and pitfalls2.
For that reason we can say that technical analysis, as body of knowledge, has been built thanks
to trading practitioners, who studied the market indepth and built
their first sound theories, and also by subsequent studies from the
academic world that, mainly in the last decades, have reinforced
some of technical analysis axioms.
We also have the support from a third category of people, who do
not come from an academic world, but have a strong scientific
background. This is the case of Perry Kaufman who began his career
as a “rocket scientist,” first working on the Orbiting Astronomical
Observatory (OAO-1), the predecessor of the Hubble Observatory,
and then on the navigation for Gemini, later used for Apollo
missions, and subsequently in military reconnaissance. In 1971 he
became involved in the futures markets and has remained there.
There is a certain connection between the construction of a trading
program and the world of rockets; in fact, the earliest systematic
programs used exponential smoothing, a technique developed in
aerospace for estimating the path of missiles.
Perry Kaufman is definitely one of the scholars of reference in the
field of technical analysis with regard to trading systems. One of the
cornerstones of Kaufman’s work has been the book Trading System and Methods, first published
in 1978, and considered “the most authoritative and comprehensive work” in the industry.
In this article I will review the new fifth edition of that work, published in January 2013, trying
to figure out if it is simply a reprint of the fourth edition with some updating, or a work in its
own right, distinguishing it from previous editions.
Kaufman’s book is one of the Chartered Market Technician Level 2 Exam reading assignments.
At first glance it could be seen by the student as very difficult to digest its contents: two kilos of
book with 1,212 pages, plus a website containing more than 400 programs and spreadsheets.
But in reality, it is a book where you don’t need to finish all the 1,212 pages to grasp the
concept and value of the book itself. It can be read non-sequentially, in selected pieces, without
losing context. It is possible to learn the basics of an argument after reading just a few pages.
For this reason this book has been compared to an encyclopedia of trading systems, or to a
comprehensive guidebook and cookbook of trading methods.

The Swiss Technical Analysis Journal • Summer 2013 • 11

But in reading this fifth edition you see that there is another new
peculiarity that has also been highlighted by the author: the added
coherence from one section to another, and from one chapter to
another. The search for an attempt to make the material flow from
section to section as a continuous learning process. That is just not to
give some blocks of recipes about trading, but to build a disciplined,
coherent framework and a step-by-step course that provides the
opportunity to increase our own culture on this subject in a critical
and constructive way.
The objective of the author is to supply a complete understanding of
the tools and techniques needed to develop and/or choose a trading
program that has a good chance of being successful. There is no one
Holy Grail technique, because all the experts in this field understand
that it is not possible to know what will happen in the future; instead,
the book evaluates the conditions under which certain methods are
likely to do better, and situations that will be harmful to specific
approaches. It is unlikely that any two traders will develop exactly
the same system, but the challenge is to find a system that will adapt
to future changes, that is, it should be robust, and the greater the
knowledge of the trader, the more likely it will succeed.
To have a trading method that works in many different situations,
and keeps working for as long as possible, is to have a robust solution.
Because of its importance, there are comments throughout the book
addressing the robustness of various methods and ways to enhance
that quality.
But the main enhancement that we can find throughout the book,
and which distinguishes this new edition from the older ones, is the
concept of risk control, from the individual trade level, to the strategy
rules, to the portfolio.
The previous edition was published in 2005, and from that period
until today we saw too many black swans3 in the financial markets.
That has demonstrated the forecasting or measuring risk in this “new
normal”4 financial environment is not useful. Kaufman has shifted his
attention to the management and control of risk, that is, more reactive
and useful than the old solution.
The book is richer by 38 pages than the fourth edition, but the
content is much greater. This is because all the TradeStation and
spreadsheet programs disseminated in these pages have been removed
and collected in a website built just for this new edition. On that
website it is possible to download a large amount of material. As of the
end of April, it contained 43 Excel spreadsheets, 25 MetaStock new
functions, and for TradeStation we had 140 indicators, 117 strategies
and 98 functions. That means more content than the previous edition,
especially in the arbitrage section.
The book is structured in four parts: first we have an introduction,
where the author speaks of the role of technical analysis and describes
the resources and the objectives of the book (chapter 1). The second
part is dedicated to the foundations: basic concepts and calculations
(chapter 2) and charting (chapter 3).
The central part of the work is about trading techniques (chapters
4-20): the book remains organized in the same way, with the types of
strategies covered starting with trend-following, momentum, cycles,
and seasonality, then moving to the more complex arbitrage, intraday
trading, and pattern recognition. In the last part we have the way in
which we can build robust trading systems (chapters 21-24).
12 • Summer 2013 • The Swiss Technical Analysis Journal
The Interview
Mario V. Guffanti (MVG) - Hi Perry, it’s a great pleasure having
you in an interview about your new fifth edition of “Trading
Systems and Methods.”
Perry Kaufman - Thank you, Mario. It is my pleasure to talk with
you.
MVG - What are the main changes and additions that have
been made to this new edition?
Perry Kaufman - If you don’t mind, I’ve made a brief list of the
changes because I knew you would ask this question:
1. I’ve made the notation consistent throughout the book, where
before I used the notation of the various works that I was drawing
on.
2. I’ve moved all the code and large tables to the website and only
show a small piece of the tables. That allowed me to keep the book
the same size but put in much more content.
3. I’ve tested nearly all of the “systems” in the book, and coded them,
where before I may have simply summarized the concepts and
formulas.
4. I’ve added more systems overall and in particular in the arbitrage
section.
5. I’ve added risk analysis and more description throughout the book
because I wanted to be sure that I was being clear. I’ve added some
important concepts in the chapter on risk.
6. I’ve removed some old material and some sections that seemed to
be repeated or of little value. I need to continue to do much more
of this if the book is going to stay the same size.
7. I’ve added my concept of “noise” in chapter 1 and tried to explain
its implications to all systems.
8. I’ve been more vocal about directing the reader towards some
methods and away from others, or showing that they are very
similar. For example, with long-term trend following and with
typical momentum indicators, the results are nearly the same if
you choose the right calculation period.
Most of the charts and examples have been updated. Some readers
may have a hard time relating to gold at $500 when it’s $1,500.
MVG - If we look for a definition of what is technical analysis in
the main classical books used as a basis to learn and study this
discipline, I mean the cornerstone books also used in the first
level of examination for technical analysts, such as Murphy5,
Pring6, and Edwards and Magee7, the topic is defined as the
study of price, using charts to forecast the movement of future
prices, or the identification of trends. In your introduction you
affirm that technical analysis is no longer just the study of
chart patterns or the identification of trend, but it encompasses
intramarket analysis, complex indicators, mean reversion,
mathematical forecasting, and the evaluation of test results.
How much do you think your concept is really applied in the
professional field and what has been the advantage for you in
having this kind of forma mentis?
Perry Kaufman - It’s true that technical analysis started as chart
interpretation. Even today I’m sure that every trader looks at a chart
to confirm whether the market is in an up or down trend, or looks
overbought or oversold. Even when the trading is entirely systematic,
it is safe to confirm your signals by looking at a chart (at least from
time-to-time). But I feel strongly that technical analysis has evolved
because we identify trends and extremes automatically now. By using
a computer instead of a pencil and ruler, we are able to find more
situations, trade more markets, and create a risk-adjusted portfolio
where we could never do that manually. Even high-frequency trading
can be just identifying “micro-divergence” instead of macro patterns.
It’s really the same thing we’ve always done, just made faster and faster.
Drawing trendlines across the bottom of swing lows can be done with
a computer, and various formulas for trendlines (moving averages,
linear regression) have replaced the manual approaches, and perform
well. And, large investors seem to want a systematic solution because
discretionary trading can be successful,
but can also be unreliable and difficult to
manage. Many feel that exploiting certain
market patterns, whether trending or mean-
reverting, have a more predictable outcome
than chart interpretation, or fundamental
analysis.
It is also possible to analyze world markets,
and identify when those markets go out-of-
line. Without a computer programmed to
identify anomalies, it would be impossible
to take advantage of all the opportunities.
One of the biggest challenges of “technical
analysis” is to develop systems that show
realistic results. At the beginning of
computerized testing there was a significant
failure due to overfitting. Most analysts have
now learned that the “best” historic results
are not likely to show what will be returned
in the future. Taking a massive set of test
results and reducing them to something
realistic is what I would now call “the Holy
Grail.” And I think we are getting closer to
doing that. We can never be perfect because
future price patterns will never be the same
as past patterns, so no past results will represent the future. But it
can be close in the sense that you can estimate the likely returns, and
the risk associated with those returns, over some reasonably long time
periods. You just never know how the profits and losses will distribute
in the future.
MVG – The events in international financial markets in recent
years have led to reconsider the risk factors in the investment
decision process. You affirm in your book that understanding
how to reduce risk before the fact is much more productive
than identifying it afterward. For that reason you introduced risk
analysis throughout the book. An academic study published at
the beginning of 20138 demonstrated that institutional portfolio
managers who consider technical analysis to be very important
for their investment decisions, outperform those who did not use
it, especially during down months, that is, in negative market
environments. Can we say that your new book, by reconsidering
the role of risk analysis, could be considered not a really updated
edition but a work in its own right?
Perry Kaufman – I hope so, and you’ve hit on the difference between
“risk measurement” and “risk management.” Since 2008 risk has
taken on a different dimension. Before that, the typical belief was
The Swiss Technical Analysis Journal • Summer 2013 • 13
that diversification into different markets was enough. That turned
out not to be true. What is true is that “money moves the market,”
not fundamentals. When there is market stress, everyone pulls their
money out, causing all markets to reverse. That caused a correlation of
1.0, and a very, very unhappy situation for investors.
The book now takes the philosophy that trying to predict which
market or which system will work best in the future is an unproductive
approach. When you apply equal risk to every trade, equal risk to
every sector, and so on, you are saying that you cannot know what
the future will bring, but that over time, we expect our trading to
work. I believe that is both the safest approach
to risk management and a major step towards
bringing expectations and reality closer
together.
Trying to predict future risk is clearly never
going to be perfect. Using past data can only
reflect the risk in that data, so more data is
always going to be better. The most common
ways of measuring risk, annualized volatility
and value-at-risk, are both good measures of
current risk, but the only control over future
risk is capping leverage. For many traders the
idea of capping leverage means they get lower
returns. But they also don’t get wiped out.
In futures, there is already built in leverage,
typically 4:1 when you consider holding funds
in reserve. If you are leveraging up in low-
volatility periods, then you need to cap that
added leverage at not much more than 3 for
a number of reasons explained in the book.
Then you have compounded leverage of 12:1,
which seems more than enough. There are
some UCITS funds that don’t allow leverage
of more than three times the market exposure,
which may seem very low, but certainly serves
their purpose of controlling future risk.
I would also like to point out that diversification into different
strategies, such as trend following and arbitrage, is much safer than
diversification into different markets. Again, we have become aware
of that because of the failure of 2008. Trading different strategies will
maintain the integrity of the portfolio through a much wider range of
market performance.
MVG - When I began reading the book I noted that chapter 2 has
a new part about “standard measurements of performance.” You
say that these performance measures will be used throughout
the book when comparing different systems and they will be
discussed further in chapter 21, System Testing. Could you
explain how this differs from the fourth edition?
Perry Kaufman - This edition is much more complete with regard to
testing systems. To allow readers to compare results, I’ve chosen the
most popular statistic, the “information ratio,” the annualized returns
divided by the annualized volatility (standard deviation). I believe
that is the single best measure, although other statistics can also be
important. So it is the combination of more tests, better display of
results, and consistent use of the information ratio that should help
readers compare one method with another.
MVG - How would traders decide which type of system would
be best for them? Are there general rules of thumb or do you
have your own method to solve this problem?
Perry Kaufman - That’s a very difficult question. Most traders are not
a “blank slate,” they have preferences such as trend following or short-
term trading. If that is the case, then they can go to the chapter on that
strategy and compare the rules and results of many approaches. They
will need to concentrate on the reward to risk ratio, but they may want
frequency of trading or larger profits per trade. Those are all personal
decisions, but important ones. You will never be a success by trading a
system that fights with your personality.
If you have no preference, then I suggest you start with long-term
trend following. It’s easy and it works. It doesn’t demand much time,
and entering the orders at a specific time is not critical. As you develop
more skill, keeping some part of your portfolio in trend following
still makes sense. Then you need to look for a strategy that gives you
diversification. That would mean pattern recognition, arbitrage (for
example, pairs) or some other mean reversion program. It will mean
faster trading and keeping an eye on the market more, so that might
not work for someone with a full-time job. But the point is to find some
other way of trading that would complement trend following. My own
favorites are the Taylor Trading Technique, intraday breakouts, and
pairs, but they must all be adapted to the trader’s style and carefully
tested. The book gives guidelines for doing this correctly.
MVG - In the medical field we have moved from a physical
semiotics to instrumental semiotics in the last few years. That
is the where the good old medical doctors were competent
to generate a diagnosis with a high probability of accuracy
through a physical examination of the person before confirming
it with an instrumental diagnosis. Today, relying too much on
machinery could diminish the quality of the treatment, and
focusing too much on technical readings and instruments for a
cure may end up with the wrong analysis. Keeping the holistic
approach seems the best course. It seems to me that the same
is also happening in the world of trading systems, one point
that you have highlighted in your book: namely the use and
abuse of the computer. At the time of Charles Dow, when the
use of computers was non-existent, those who created the first
trading rules were heavily focused on the markets, on their price
curves, and the psychology behind them. What is the secret
to keeping this mindset in this super-technological world and
having a sound and underlying premise to base our trading ?
Perry Kaufman - You’ve hit on a brilliant question, can a computer
replace a person in making these decisions? I think the simplest way to
view it is to compare a person who uses the full power of a computer to
optimize a strategy, putting in as many rules and formulas as possible,
without regard to whether any of those are meaningful. I’ve seen this
done with neural network applications. The idea is to let the computer
tell you what works and doesn’t work. Let it discard all the unnecessary
data. I find that the completely wrong approach. You cannot find a
successful system by data mining. The results will look brilliant but
have no chance of working.
The only way to find a successful trading strategy is to understand the
market and to observe its patterns. You then arrive at what we both
call a “sound premise.” For example, you believe that interest rates are
the result of monetary policy, so you use long-term trend following to
track the effect of that policy on interest rate futures. Or, you decide
14 • Summer 2013 • The Swiss Technical Analysis Journal
that Hewlett-Packard and Dell should show similar price movement,
so you want to arbitrage them when they move apart. Both are based
on a fundamental understanding of the market, not on technology. Of
course, having decided that arbitrage is a great way to trade, you can
now use technology to speed up the trading signals and – voila! – you
have high-frequency trading. So the answer is “holistic,” that is, you
combine the common sense of the trader with the power of technology,
but the traders common sense is the more important part.
MVG - In your new edition you’ve added some new subsections.
I saw three associated with the topic: “Early Exits from a Trend”
(chapter 8), “Kaufman on Stops and Profit Taking” and “Entering
a Position” (chapter 23). Can you tell why these were important
enough to merit new subsections?
Perry Kaufman - Some of these deal with both the technique and
philosophy of entering and exiting. For example, if you’re a long-term
trend follower, then exiting with profits, or using stops, fights with
the underlying strategy. In order to have profits from trend following
you need to capture the “fat tail,” those very big profits that offset
all the small losses. If you add profit-taking or stops to your trend
system and exit while the trend is still intact, then you risk missing
the really big profit and your system will eventually fail. So that these
extra rules must be combined with a way of re-entering the trend trade
so that you don’t miss that rare big profit. I try to give the reader an
understanding of the problem, the exceptions, and some examples of
how to solve the problem. I think it’s an important addition.
MVG - The Adaptive Market Hypothesis9 affirms that markets
are not always efficient, nor are they always irrational: they are
adaptive. The behaviour that may seem irrational is, instead,
behaviour that has not yet had sufficient time to adapt to
modern contexts. Therefore, fixed investment rules that ignore
changing environments will almost always have unintended
consequences, and pattern recognition, in any form, may yield
important competitive advantages. These axioms seem to be
almost a paraphrase of what you wrote when describing the
search for the robustness of a trading system: your rule number
two being that the characteristics of a system with the best
forecasting ability is that it must adapt to changing market
conditions. In addition, I also found very useful the chapter
about price shocks, which can be considered a very important
part in the construction of a trading system to avoid catastrophic
losses. Can you tell us in an Occam’ Razor style (“One should
not increase, beyond what is necessary, the number of entities
required to explain anything”), your view about this topic?
Perry Kaufman - The market itself evolves. In the 1990s, Toby Crabel
published his book on intraday breakouts where he used fixed points
to define the breakout. For example, if T-Notes opened at 110 and
rallied 4/32nds, then we buy. But 4/32nds doesn’t work if the market
has a different volatility. You entered either too soon or too late. And
then we all know that price movement, even across different markets,
has become more correlated. In the subprime collapse of 2008 all the
markets moved together, not because of fundamentals, but because
money moves the market. From that, we have evolved a much better
way of managing risk.
Another part of this question is “How long will a system work?” I
can’t answer that. Some continue to work, such as trend following,
but other pattern recognition systems only work for a short time. I can
say that you must monitor the performance and be able to recognize
when a system is no longer doing what it should, before you lose all
your money. A system developer might want to read Dietrich Dörner’s
book, The Logic of Failure, because it explains the importance of
monitoring your work.
As for price shocks, yes, they are rare but important events that can
cause you to fail. You can’t ignore them, so I give various ways you can
deal with them and still survive.
MVG - Martin Pring defined technical analysis as an art. Antti
Ilmanen, fund manager and researcher, wrote that investment
activity is both art and science: however, a good scientific
background can enhance the artist. What’s your opinion?
Perry Kaufman - Of course I believe that a scientific background is a
great advantage, but common sense and discipline will work also. You
don’t need to be a rocket scientist, but you do need to be systemactic,
that is you should have clear rules that you follow. If you are skilled
at using development software, such as TradeStation and MetaStock,
then you must test your work correctly and accept bad results. While
discretionary traders may make huge profits from time to time, my
own approach is to create a system that grinds out profits, with a
certain level of risk, over time. And, I think that approach has become
more popular among both traders and investors.
MVG - The book is written very clearly, but it is also very
challenging with its 1,212 pages. What kind of advice would you
give to the first-time reader, or the trader who is just starting?
Perry Kaufman - I try to give an overview of the topics at the beginning
of each chapter, so I would start simply by reading the first page or
two of each chapter. Then go back to the chapters that seem most
interesting to you. The chapters each progress from simple to more
complex, so you can stop any place and pick it up later. Or, if you have
an idea of a method that interests you, you can always look it up in the
index and start there.
MVG - You dedicated your book to your wife Barbara, and in the
preface you thank Barbara for her everlasting support that is
only enhanced by rolling her eyes whenever you say that “this is
my last book, ever.” Did you make this promise again?
Perry Kaufman - I always promise and it’s always not true.
MVG - This reminds me an aphorism attributed to Winston
Churchill: “There are three great things in the world: the oceans,
the mountains, and an engaged person.” Thank you, Perry.
The Swiss Technical Analysis Journal • Summer 2013 • 15
Footnotes
1 A. Lo and J. Hasanhodzic – The Heretics of Finance – Bloomberg
Press – 2009
2 See A.Lo and J Hasanhodzic – The Evolution of Technical Analysis
– Bloomberg Press – 2012 - Chapter 7, 8 and C. D. Kirkpatrick &
J. R. Dahlquist – Technical Analysis – 2 ed. - Chapter 4 – Pearson
Education – 2011;
3 The term “Black Swan” was created by Nassim Taleb, Distinguished
Professor of Risk Engineering at New York University’s Polytechnic
Institute, to indicate an isolated event that does not fall within the
normal expectations, because nothing in the past may indicate its
existence;
4 “The New Normal,” is a term that Bill (William H.) Gross coined
in March, 2009, to define the economic landscape for years, or
decades, to come. “When the U.S. and global economy reset
after the crisis, [the global economy] will look different,” says
(Mohamed) El-Erian of PIMCO. “This has implications for
investment strategies, how you run a business and what you offer
your clients.”
5 Murphy, John J.: Technical Analysis of the Financial Markets, New
York Institute of Finance, New York, NY, 1999;
6 Pring, Martin J.: Technical Analysis Explained, 4th (or current)
Edition, McGraw Hill Book Company, New York, NY, 2001;
7 Edwards, Robert D. and Magee, John, Technical Analysis of Stock
Trends, 9th (or current) Edition (2001-­2008), John Magee Inc.,
Chicago Illinois 2001;
8 Smith, Faugère & Wang – 2013 Head and Shoulders Above the
Rest? The Performance of Institutional Portfolio Managers Who
Use Technical Analysis - http://papers.ssrn.com/sol3/papers.
cfm?abstract_id=2202060
9 Lo – The Evolution… - Chapter 8 – Adaptive markets and Technical
Analysis
Mario Valentino Guffanti, CFTe is a Financial Advisor,
Certified Financial Technician and Researcher. He is the
Assistant Vice President of the Swiss Italian Chapter of
the Swiss Association of Market Technicians (SAMT)
and also a Lecturer in Technical Analysis at the Centro
di Studi Bancari in Vezia (CH)
l Genève

Geneva
Chapter 22 April Event
Guest speaker: Bruno
Estier, MFTA, MSTA, Bruno
events Estier Strategic Technicals,
Geneva.
The event was held at
22 April, 30 May Credit Suisse.

& 13 June 2013

30 May Event
Guest speaker: Michael Reisner, Head of Equities
Technical Analysis at UBS Investment Bank, Zürich.
The event was held at Bloomberg.

13 June Event
Guest speaker: Andrew Pancholi (center),
Leading Cycle Specialist, London.
The event was held at Credit Suisse.

16 • Summer 2013 • The Swiss Technical Analysis Journal

 Cusp Catastrophe Theory:
A Model for Technical Analysis
Hank Pruden, Ph.D.
Technical analysts suffer from too much
data, not too little. The superabundancy
of data probably leads them to employ too
many statistical indicators, many of which
are redundant, conflicting, or downright
confusing.
As a result, technicians sub-optimize: they
have too many opportunities (excuses) for
making buy and sell decisions. These leave
technicians prey to fear and hope emanating
from within themselves and to social pressure
closing in on them from without. No
wonder there exist that stigmatic indictment
of the chartist fraternity: when advisors hold
a consensus opinion which is extremely
bullish or bearish, they are almost invariably
wrong.(1)
That the technicians have a spotty record is
not surprising if one examines the theoretical
frameworks or models which these chartists
use to guide the construction, interrelation
and interpretation of their indicators. In
fact, theoretical frameworks are conspicuous
by their absence. Little exists beyond simple
verbal anchorings to “supply and demand,”
“mass psychology,” “fear and greed,” “inertia,”
and similar global notions. Technicians
skills and interests seem to lie outside of
model building. Typically, technicians love
to create indicators with which to predict the
behavior of stocks or averages. Give them
a few positive correlations and they hatch
anew system for beating the market.
Models are the weak link in the market
(technical) decisions support system (see
Figure 1.) The technicians’ role is to answer
money managers’ questions on when optimal
peaks and troughs are reached by conducting
(largely statistical) analysis of data according
to models of the market. Models are ideas
of how the world works and are therefore
guides to seeking out and evaluating what is
interesting and worthwhile in the data.
The Swiss Technical Analysis Journal • Summer 2013 • 17
What is lacking in the arena of market
timing is a comprehensive, unifying,
theoretical model. Indeed, the paucity of
sound, unifying frameworks plagues the
social sciences in general, and stock market
analysis in particular. Until recently, a major,
new general model was simply unavailable.
But now the promise of a vast and powerful
paradigm has become available with the
discovery of Catastrophe Theory.
Catastrophe Theory
“Catastrophe theory is a new mathematical
method for describing the evolution of forms in
nature. It was created by Rene Thom who wrote
a revolutionary book “Structural Stability
and Morphogenesis” in 1972, expanding the
philosophy behind the ideas.(3) It is particularly
applicable where gradually changing forces
produce sudden effects. We often call such
effects catastrophes, because our intuition
about the underlying continuity of the forces Figure 1
makes the very discontinuity of the effects so A manager uses a market decision support
system (MDSS) to learn about the business
unexpected, and this has given rise to the name.
environment and take action with respect to it.(2)
The theory depends upon some new and deep
theorems in the geometry of many dimensions,
which classify the way that discontinuities can
occur in terms of a few archetypal forms; Thom
calls these forms the elementary catastrophes.
The remarkable thing about the results is that,
although the proofs are sophisticated, the
elementary catastrophes themselves are both
surprising and relatively easy to understand,
and can be profitably used by scientists who are
not expert mathematicians.”(4)
In a pioneering effort, Zeeman attempted
to show how the elementary catastrophe,
the CUSP CATASTROPHE model, could
explain the unstable behavior of stock
exchanges.(6) He believed a similar model
could be applied to currencies, property
markets, or any market that admits
speculators. In essence, Zeeman held that
all the pertinent mathematical features of a
stock exchange could be synthesized into a
single concept, the Cusp Catastrophe.
Equilibrium Surface
The model posits two parallel surfaces.
The upper behavior or equilibrium surface
is represented by a price index such as the
Dow-Jones Industrial Average. This behavior
surface is further sub-divided into a top sheet
representing bearish behavior. Each point
on the behavior surface is an equilibrium
juncture between supply and demand, even
though incremental and transitory.
Near the center of the behavior surface lies the
catastrophe model’s most interesting feature a
fold curve or cusp. What this suggests is that
there are no equilibrium (turning points)
available until the top sheet is reached after
a buying stampede or the bottom sheet is
reached after a selling panic. Notice that the
abstract model shows the behavior surface
curving over to a threshold point, after which
comes the panic sell-off. One can visualize
top reversal patterns, bottom reversal patterns
and breakouts at the thresholds. Obviously,
the thresholds are points at which to sell or
buy, which is precisely how current technical
theory and practice instructs us to act.
Control Surface
Since the behavior surface is the dependent
variable, there must exist some independent
variable(s) which account for the index or
to which the index may be attributed. In
Exhibit 2, the independent variables are fear
and greed.
The model featured in this article (Exhibit
2) presents fear and greed as two normal
but opposing factors lying on either side of
the cusp. The placement of fear and greed
as conflicting variables is an interpretation
by this author. The approach given here
to the control variables differs sharply
from Zeeman’s original model. Zeeman
hypothesized that there are two types of
investors, fundamentalists and chartists, or
investors and speculators. To him it was
the excessive, speculative behavior at the top
which set up selling panics. However, his
version did not envision buying stampedes.
Fear and greed are not viewed as single state
variables in Exhibit 2; rather they vary along
spectrums from lesser to greater degrees. Fear,
for example, may be viewed as ranging from
euphoria to confidence to hope to concern to
worry to panic; in other words, fearlessness to
fear or optimism to pessimism. Greed may
be defined as ranging from low to high levels
of greediness, such as when greedlessness
or parsimony leads to overselling and
18 • Summer 2013 • The Swiss Technical Analysis Journal
undervaluation, and covetous drives lead to
overbuying and overvaluation. A different
perspective is to view fear as activating selling
or supply and greed as activating buying or
demand.
Why don’t fear and greed simply cancel each
other out, leaving a stable, neutral market
index? The reason is because fear and greed
are oppositional variables held together in
dynamic tension – they are reflected in the
struggle between. the bears and the bulls.
According to the Cusp Catastrophe Model,
the conflict between fear and greed is the
motor force which drives the market. The
price index at any one point reflects the
relative strength of these bullish and bearish
forces.
Cusp Model in Operation
Now let us imagine Exhibit 2 in operation.
The flow of the market index takes place over
a smooth surface composed of equilibrium
points. Changes in the control variables,
fear and greed, have unique responses on the
behavior surface. The dynamic process of the
model causes the index to seek out local points
of stable, albeit temporary, equilibrium.
Starting at a bear market low, where the
market index is on the lower at-tractor sheet,
the level of greed (demand) is suppressed by
the level of fear (supply). Mounting greed
gradually overcomes fear until the edge of the
sheet is reached, at which point the market
breaks out of an upside reversal pattern via a
catastrophe jump to the top sheet. The index
Exhibit 2
A CUSP CATASTROPHE MODEL OF A STOCK EXCHANGE
(Exhibit 2 shows a diagramatic rendition of a Cusp Catastrophe.)
then flows along a rising channel on the top
sheet until the bullish potential is exhausted.
At that point, both greed and fear are high.
Finally, as fear overcomes greed the market
index reaches a threshold on the top sheet,
then plunges to the bottom sheet via a bearish
catastrophe jump.
What is dramatically different about this
dynamic flow is that when both fear and
greed are high and in opposition, the
behavior surface solution is bimodal: within
the fold curve zone a slight divergence in a
control parameter can trigger either a bull
catastrophe or a bear catastrophe.
Predicting which way the index will jump
out of a bimodal or horizontal equilibrium
trading range becomes less uncertain when
the antecedent levels of fear and greed are
known. Intuitively we can imagine the
probable course of security prices if we
frighten a group of greedy investors after
there has been a substantial rise in the market
index.
Salient Properties
What are the salient properties of the
Catastrophe Theory model, and what are
their stock market counterparts?
“Five properties characterize phenomena that
can be described by the Cusp Catastrophe. The
behavior is always bimodal in some part of its
range, and sudden jumps are observed between
one mode of behavior and the other. The jump
from the top sheet of the behavior surface to the
bottom sheet does not take place at the same
position as the jump from the bottom sheet
to the top one, an, effect called hysteresis.
Between the top and bottom sheets, there is
an inaccessible zone on the behavior axis; the
Exhibit 3
Salient Properties of Cusp Catastrophe Theory
The Swiss Technical Analysis Journal • Summer 2013 • 19
middle sheet representing least likely behavior
has been omitted for clarity. Finally, the Cusp
Catastrophe implies the possibility of divergent
behavior.”(5)
1. Biomodality, 2. Catastrophic jump,
3. Hysteresis, 4. Inaccessible zone, and 5.
Divergence are squared up with their stock
market equivalents in the accompanying
table. (See Exhibit 3)
Applications
The Cusp Catastrophe model shines a
spot–light upon the importance of price
formations immediately before the mark
up or mark down “ jump “ phase. The key
chart patterns are triple descending price
peaks during side ways top formations and
triple ascending price peaks during side ways
bottom formations. A prime example of
this phenomenon is the right-angle triangle
price formation. In a forthcoming article in
the SAMT Journal, I shall illustrate another
application of Cusp Catastrophe Theory
which at the same time adds a new schematic
to the Wyckoff Method of technical analysis.
Henry (Hank) Pruden, Ph.D.
Dr. Pruden is a private investor, a
lecturer at Golden Gate University
and a member of the Board of
Directors of the Technical Securities
Analysts Association of San
Francisco.
http://www.hankpruden.com/
 Lugano l

Lugano
Chapter
and the
Centro di
Studi Bancari The 27 May event, organized by Nicola Donadio of Centro di Studio Bancari di Vezia and
Mario Valentino Guffanti, Assistant Vice President of the SAMT Lugano Chapter, saw the
event participation of three speakers: Alessandro Angeli, MFTA, Alberto Vivanti, Vice President of
Lugano Chapter, and Ron William, CMT, MSTA, Vice President of Geneva chapter.
From L-R: Ron, Nicola, Mario, Alberto, and Alessandro.
27 May 2013

20 • Summer 2013 • The Swiss Technical Analysis Journal

 SmartView Model
Alessandro Angeli, CFTe, MFTA

An Introduction to the SmartView
Model
I have been always amazed by the capacity of
a closing moving average to provide, during
trending markets, support and resistance
areas and profitable buy & sell signals.
Aware of the limits of moving averages, I
have tried to develop something, without
departing too much from the averages’ basic
idea, which was able to work not worse
during trending markets but much better
during other kinds of movements.
After reading many technical analysts’
reports and specific technical analysis books,
the first thing I have noticed is that generally
closing moving averages are plotted on bar-
charts or candle-charts and not on close-only
charts. The second thing I have observed is
that analysts usually ask the closing moving
averages to provide, during bullish trends,
support areas near the lows of the price-bars
and, during bearish trends, resistance areas
near the highs. Furthermore, it’s generally
accepted that a buy signal is generated when
the price closes above the closing moving
average and that a sell signal is generated
when the price closes under the closing
moving average.
In my opinion these interpretations are not
wrong, but they contain something that
doesn’t persuade me completely. Why should
I use an algorithm (the moving average) based
on the closing price hoping it will provide
support areas near the lows of the price-bars
and resistance areas near the highs? Closing
prices are usually above the lows and under
the highs; and in any case they are different.
Rather than focus on closing prices, I believe
that support and resistance should be
determined using high and lows prices, since
high and low prices are specifically geared
to ideas of support and resistance. So rather
than examine moving averages of closing
prices for support or resistance, it might be
better to use moving averages of lows and
highs to determine support and resistance
respectively.
And something else could be observed also
about the classical definitions, explained
above, of the buy & sell signals. Surely they
are correct because everything is based on the
closing price. But if we try to imagine a buy
signal when the price closes above the high-
moving average and a sell signal when the
price closes under the low-moving average,
the signals can be considered much stronger.
What You Should and Shouldn’t Ask of
Moving Averages
Moving averages are generally considered
trend-following indicators because their
signals are profitable during trending-
markets and they often become wrong when
the market moves sideways.
So the first thing you shouldn’t expect from
a closing moving average is that it works well
during trading-ranges. But an other thing you
shouldn’t expect is that a particular closing
moving average (for example the 15-periods
one) works well in all the trends which are
developing on the chart. First of all note that
I define a trend as bullish if it’s possible to
identify on the chart rising highs and lows
and that I define a trend as bearish if it’s
possible to identify falling highs and lows. As
said before, a closing moving average tends
to be a support in an uptrend and to become
Figure 1: Eur/USD (weekly data) and the 15-periods closing EMA.
a resistance in a downtrend. However, in
order to get good results, trends have to be
enough extended in temporal terms. In fact,
if it doesn’t happen, a closing moving average
(for example the 15-periods one), which is
able to support an uptrend for a long-time,
couldn’t have the time to become an efficient
resistance in a short-term movement in the
opposite direction, even if the new trend has
the same slope. This happens because the
change of direction of the closing moving
average is generally quite slow and so, if
the new trend is not enough extended, the
average could be unable to represent it before
its end.
Furthermore, in order to obtain profitable
buy & sell signals, uptrends and downtrends
should have more or less the same slope. In
fact if the trends have consistently different
slopes it’s very difficult that a particular
closing moving average (for example the 15-
periods one) is able to provide good signals
with all of them.
Figure 1 shows the weekly chart of the Eur/
USD with the 15-periods closing EMA. It’s
easy to notice that its signals are profitable
during long-term or middle-term trends with
more or less the same slope (B and D) and
that they become wrong in short-term trends

The Swiss Technical Analysis Journal • Summer 2013 • 21

(A and C) and during sideways movements as
well (E).
Some Solutions to Improve the Moving
Averages’ Signals
Aware of the limits of the moving average in
relation to the closing price, many technical
analysts have conducted intensive research
in order to develop a moving average which
would be able to work well in almost all market
conditions. The most of them concentrated the
research on two of the three parameters that
need and input by the analyst: the number of
time periods (the length) and the calculation
method. The two people who obtained the
best results in this way are Tushar Chande and
Perry Kaufman. They respectively developed
the Variable Index Dynamic Average (VIDYA)
and the Kaufman’s Adaptive Moving Average
(KAMA).
Another person who also worked with moving
averages is Jake Bernestein who concentrated
instead on the third parameter, the price field,
developing in this way the Moving Average
Channel (MAC).
Bernstein’s MAC
Jake Bernstein tried to improve moving
averages’ signals in relation to the price
working with the price field. In one of his first
books he explains that, inspired by concepts
originally introduced in the 1950s by Richard
Donchian, he departed from the traditional
use of the moving average having conducted
intensive research on moving average channels
(MACs) which consist of a moving average
of high prices and a moving average of low
prices. Rather than focus on closing prices,
he felt that support and resistance should
be determined using high and low prices
because usually resistance tends to be found
near previous highs and support tends to be
found near previous lows. His technique uses
a moving average of high prices and a moving
average of low prices in conjunction which
form a Moving Average Channel that is used
for determining support and resistance. More
precisely when the trend of prices is up, the
Moving Average of Lows (MAL) tends to act
as support and when the trend of the prices is
down the Moving Average of Highs (MAH)
tends to act as resistance.
Jake Bernstein provides in his book a lot of
examples but almost all of them are about
intraday markets. Further on he suggests
many different interpretations in order to use
the MAC during trending or sideways markets
and by aggressive or conservative traders.
22 • Summer 2013 • The Swiss Technical Analysis Journal
Figure 2 shows the same Eur/USD chart of
figure 1, except the MAC is plotted.
Although the MAC is not easy to use because
the two lines tend sometimes to make a mess
in the chart, it’s possible to notice that, very
often, the two averages provide efficient
support and resistance areas.
The SmartView Model Explained
The SmartView model is my contribution
to the research in technical analysis with
the ambitious purpose to improve moving
averages’ signals in relation to the price.
It could also be intended as an attempt to
complete Bernstein’s MAC in order to simplify
its use and to identify more easily the real key
levels of support and resistance it provides.
Two is Better Than One
I believe that the use of two moving averages,
a moving average of the high prices and a
moving average of the low prices could really
lead analysts to a better interpretation of what
is happening in the price-chart than the one
they would have been brought just using
a closing moving average in relation to the
closing price itself.
I have this idea for two reasons. The first one
is that this argument is logical and rational.
In fact, as said before, usually resistance
tends to be found near previous highs and
support tends to be found near previous lows.
So, it’s surely reasonable that rather than
examine moving averages of closing prices
for support or resistance, it might be better
to use moving averages of lows and highs to
determine support and resistance respectively.
Furthermore, if we consider the buy signal
when the price closes above the high-moving
Figure 2: Eur/USD (weekly data) and the MAC or the 10-periods exponential moving average of the high
prices (MAH) and the 8-periods exponential moving average of the low prices (MAL).
average and the sell signal when the price
closes under the low-moving average, these
signals can be considered much stronger in
relation to the classical moving averages’ buy
& sell signals.
The second reason is that in my experience
this idea really works very well. I’ve tested it
on stocks, currencies, indexes, commodities
and bonds of different market places and in
multiple time frames (from 5-minutes data to
quarterly data) and I’ve very often obtained
interesting results.
But unfortunately the use of the MAC is
not so easy as it could appear. In fact when
the MAC is plotted on the chart an accurate
and careful analysis is needed to exploit all its
potentialities. For example during an uptrend
analysts could pay attention only to the MAL
(which tends to act as support) and they
could forget that also the MAH could be very
useful. In the same way, during a downtrend,
analysts could pay attention only to the MAH
(which tends to act as resistance) and they
could forget that also the MAL could be very
powerful. But it’s also true that there are often
a lot of times in which one of the two averages
is completely useless and its presence on the
chart makes only a confusion. Further on it’s
not easy at all to appreciate the MAC during
high-volatility sideways movements because
the two averages are continuously penetrated.
In conclusion we could say that it is easier to
work with a closing moving average rather
than with the MAC, although its signals are
probably less indicative.
But there is a last point I would like to talk
about before going on. Sometimes it’s not
easy to present technical analysis models in
banks, funds or in other financial institutes
because unfortunately money managers,
financial advisors, bankers and customers
have still a few knowledge of this subject. So
it’s necessary, in order to create also a stronger
interest towards technical analysis, to show
and produce systems of which benefits could
be rapidly understood. Figure 2 is complex
for people who do not have studied technical
analysis in depth.
The real key of my research consists therefore in
an appropriate elaboration of the MAC based
on programming, opportunely a technical
analysis software in order that it shows the
moving average of the low prices (MAL), the
moving average of the high prices (MAH) or
both of them exclusively when I really need
them. The output of this programming is the
SmartView model which I like to define as a
new way of looking at price-charts.
An Easy Programming
The SmartView model is based on the
relationship between the MAC, the closing
price and the opening price in each trading
period.
The Position of the Closing Price
The closing price has surely the major weight
comparing to the other three prices (open, high
and low) which form a price-bar. I don’t need
to explain why. In fact this idea is generally
accepted by the most part of technical analysts.
As a consequence, I think it’s very important
to consider the closing price in relation to the
MAC in each trading period.
The MAH, for its construction, can always
be defined as a resistance moving average.
Then, if the closing price is above the MAH,
we can presume that the resistance has been
broken. If it happens, I think there is no need
to see the MAH on the chart because prices
are expected to rise and it’s useless to see a
resistance under prices. To resume, I want to
see the MAH on the chart only if the closing
price is under the MAH. In the same way
the MAL, for its construction, can always be
defined as a support moving average. Then, if
the closing price is under the MAL, we can
presume that the support has been broken. If
it happens I think there is no need to see the
MAL on the chart because prices are expected
to fall down and it’s useless to see a support
above prices. That means I want to see the
MAL on the chart only if the closing price is
above the MAL.
These are the two first conditions of the
SmartView model and they are stronger than
The Swiss Technical Analysis Journal • Summer 2013 • 23
the second ones which will be treated in the Besides providing information about the
next section. market direction and the real existence of a
trend, the SmartView model furnishes also
The Position of the Opening Price
support and resistance levels which could
Even if the opening price has probably the
be identified observing the exact position
minor weight comparing to the other three
of each dot on the chart. As a consequence,
prices (high, low and close) which form a
the model is able to provide in every period,
price-bar, I think that it is in any case very
paying attention to the number and to the
important to take it into account in relation
colour of the last dots, both stop loss and long
to the MAC.
& short entry levels. A buy signal occurs at
For example, if the opening price of a trading the first trading period when the model plots
period is above the MAH, it means that it’s only a green dot; a sell signal occurs at the first
not working as well as resistance. Later, if the trading period when the model plots only a
closing price of the same trading period will red dot.
place above the MAL, it will be useless to show
Before going on, it is very important to notice
the MAH on the chart because it represents a
that price levels provided by the SmartView
resistance which hasn’t done its job well from
model when the market is still open, should
the first price. Instead, if the closing price will
be broken with the closing price in order that
place under the MAL, the MAH should be
the signal could be considered valid. For this
plotted on the chart because we can presume
reason, it’s useful to consider the model only at
that in the next trading period the market will
the end of each trading period and not during
fall (a support has been broken) and it will be
its construction. Obviously this condition
useful to have in advance a reference resistance
must be fulfilled in all the technical indicators
value. In the same way, if the opening price of
which are based on the closing price. However
a trading period is under the MAL, it means
in the SmartView model this aspect has a lower
it’s not working very well as support. Later, if
weight. In fact the resistance and the support
the price of the same trading period will close
levels depend exclusively on the highs and on
under the MAH, it will be useless to show
the lows and they are not based on the closing
the MAL on the chart because it represents a
price. Therefore in some cases, if the market
support which hasn’t done its job well from
is trading sufficiently away from the highs or
the first price. Instead, if the closing price will
from the lows, it’s possible to have an effective
place above the MAH, the MAL should be
resistance or support reference value before
plotted on the chart because we can presume
the end of each period.
that in the next trading period the market
Before plotting the SmartView model, it
will rise (a resistance has been broken) and it
is possible to choose the moving averages’
will be useful to have in advance a reference
support value. calculation method (simple, weighted,
exponential, triangular, Chande’s Vidya and
The SmartView Model
Kaufman’s AMA) and their length. My default
The SmartView model can be defined as a new settings are: 10-periods exponential MAH and
way of looking at price-charts with moving 8-periods exponential MAL. The Exponential
averages. Its first aim is to help analysts to Moving Average (EMA)-SmartView model can
follow as well and easy as possible financial be written as an indicator in Omega code as:
markets movements. The SmartView model
appears on the price chart combining each
trading period with alternatively: a green dot
placed under the price-bar (the MAL value), a
red dot placed above the price-bar (the MAH
value) or two dots of two colours.
Briefly, the model signals the probable
presence of:
• a bullish trend, when the SmartView model
shows just green dots;
• a bearish trend, when the SmartView model
shows just red dots;
• a trading range when the SmartView model
shows dots of both the two colours.
EMA-SmartView : SmartView of look at the rectangles in the second part of the Figure 5 shows the 60-minutes chart of
Exponential Moving Averages. 2000 and in the 2003. The EMA-SmartView the S&P500 Future (04-Sep), the EMA-
Provided by Alessandro Alberto Angeli (c) furnishes correct resistance and support SmartView and the 15-periods closing EMA.
Copyright 2004. All rights reserved. levels absolutely sooner than the 15-periods In the middle of the chart it’s possible to
closing EMA. Further on, during bullish identify a double bottom pattern.
Inputs: PeriodH(10), PeriodL(8); (bearish) trends the EMA-SmartView provides
The buy & sell signals that the two indicators
If (C>Xaverage(H,PeriodH)) then interesting resistance (support) areas which, if
provide during this reversal formation, are
plot1(Xaverage(L,PeriodL),”Support”) broken, confirm the original trend. Consider
very similar. However, in the rectangle, which
the ovals in figure 4; this information is not
else underlines when prices move sideways, the
given at all by the 15-periods closing EMA.
if (O<Xaverage(H,PeriodH)) then EMA-SmartView gives interesting and correct
plot2(Xaverage(H,PeriodH),”Resistance”); During Major Reversal Patterns support and resistance levels, especially in the
If (C<Xaverage(L,PeriodL)) then During major reversal patterns (double oval, providing precious information which
plot3(Xaverage(H,PeriodH),”Resistance”) bottoms, H&S, broadening formation, etc.) the 15-periods closing EMA is not able to
else prices very often move sideways for a while furnish at all.
if (O>Xaverage(L,PeriodL)) then even if the volatility remains in general quite During Trading-Range Movements
high. For this reason a closing moving average
plot4(Xaverage(L,PeriodL),”Support”) Figure 6 shows the weekly chart of the DJIA,
usually provides wrong buy & sell signals.
the EMA-SmartView and the 15-periods
Figure 3 shows the same Eur/USD chart of
figures 1 and 2, except the EMA-SmartView
is plotted. The model shows the support and
the resistance levels exactly when I want and
need them.
Advantages of Using the
SmartView Model
I believe that the use of the SmartView model
leads analysts to a better interpretation of
what is happening on the price-chart than the
one they would have been brought just using
a closing moving average in relation to the
closing price itself. If the logical and reasoned
arguments presented in chapter 1 and 2 haven’t
yet persuaded the reader, I’ll try now to prove
my purposes presenting some real examples
in multiple time frames taken from different
international marketplaces.
During Trending Markets Figure 3: Eur/USD (weekly data) and the EMA-SmartView (default settings).
Figure 4 shows the monthly chart of the
German DAX Index, the EMA-SmartView
and the 15-periods closing EMA. The 15-
periods length has been chosen because,
during trending movements, this average tends
to be very similar to the EMA-SmartView with
default settings and in this way it’s possible to
do a comparison. Carefully observing the chart
it’s possible to notice that, when the market
is trending, the EMA-SmartView provides
buy & sell signals very similar to the closing
EMA ones even if, in my opinion, the EMA-
SmartView works slightly better. However,
from this point of view, we could say that
the use of the EMA-SmartView instead of the
closing EMA is not a handicap.
Considering now the function of support and
resistance the two indicators provide, I think
that the EMA-SmartView works better. Have a Figure 4: Dax Index (monthly data), the EMA-SmartView (default settings) and the 15-periods closing EMA.

24 • Summer 2013 • The Swiss Technical Analysis Journal

closing EMA. When the market moves Conclusion decisions, and in this way I’m fully satisfied.
sideways the closing EMA tends to flatten and On the other hand, the SmartView model
The SmartView model is first of all a trend-
to place itself in the middle of the trading- could also be used as a trading system or as a
following indicator which seems to work
range, becoming completely unable to provide trading method, but it is absolutely necessary
very well, or at least not worse than a closing
efficient support and resistance areas. Further to be aware of the limits that the SmartView
moving average. Furthermore it provides
on it gives a lot of wrong buy & sell signals, model meets in high-waves movements and
powerful information during low-volatility
in particular when the volatility is quite low, during high-volatility trading-ranges because
trading ranges; in these situations it is very
as it’s possible to see in the rectangles drawn in those periods wrong signals will be given. A
useful, much more than a closing moving
on figure 6. On the other hand the EMA- solution could be combining the signals given
average. But unfortunately it’s not perfect. In
SmartView provides splendid resistance and by the SmartView model with other technical
fact it suffers high-waves movements and high-
support areas which really helps analysts to indicators. Personally, I use the model with
volatility trading-ranges. Anyway I do not ask
identify the trading-range bands. When the the stochastic oscillator. It helps me to identify
it to work always. I’ve developed it to help
volatility increases but the market continues possible reversals and to understand if the
me in my job (analyst and portfolio manager)
to move sideways (in the ovals) the two market is in a positive or in a negative cycle.
in order to make good investment choices,
indicators provide more or less the same buy
especially about underweight and overweight
& sell signals.

References
• Bernstein, J., 1995, The Compleat Day
Trader, McGraw-Hill, USA.
• Chande, T.S.,1994, The New Technical
Trader, Wiley, USA.
• Kaufman, P., 1995, Smarter Trading,
McGraw-Hill, USA.

Figure 5: S&P500 Future 04-Sep (60-minutes data), the EMA-SmartView and the 15-periods closing EMA.

Figure 6: DJIA (weekly data), the EMA-SmartView (default settings) and the 15-periods closing EMA.

The Swiss Technical Analysis Journal • Summer 2013 • 25

Bibliography
Achelis, S., 2001, Technical Analysis from A to
Z, McGraw-Hill, USA.
Bernstein, J., 1993, Short-Term Futures
Trading, Probus, USA.
Bernstein, J., 1995, The Compleat Day Trader,
McGraw-Hill, USA.
Bernstein, J., 1997, The Compleat Day Trader
II, McGraw-Hill, USA.
Bernstein, J., 2000, Strategies for the Electronic
Futures Trader, McGraw-Hill, USA.
Castagnoli, E., 1991, Introduzione alla
selezione di portafoglio, Coop. L. Milano,
Italia.
Chande, T.S.,1994, The New Technical
Trader, Wiley.
Chande, T.S.,1997, Beyond Technical Analysis,
Wiley, USA.
Coliva, E., Galati, L.,1992, Analisi tecnica
finanziaria, Utet, Italia.
DeMark, T.R., 1994, The New Science of
Technical Analysis, Wiley, USA.
Edwards, R., and J. Magee, 1966, Technical
Analysis of Stock Trends, Amazon, USA.
Eng, W.F., 1993, The Day Trader’s Manual,
Wiley, USA.
Fornasini, A., 1996, Mercati finanziari: scelta
e gestione di operazioni speculative, Etas,
Ita.
Fuller, R., and J. Farrel, 1993, Analisi degli
investimenti finanziari, McGraw-Hill,
Italia.
Gabbi, G., 1999, La previsione nei mercati
finanziari, Bancaria Editrice, Italia.
Hull, J.C., 1997, Opzioni Futures e altri
derivati, Il Sole 24 Ore, Italia.
Kaufman, P., 1998, Trading Systems and
Methods, Wiley, USA.
Kaufman, P., 1995, Smarter Trading,
McGraw-Hill, USA.
Meyers, T., 1994, The Technical Analysis
Course, Probus, USA.
Morris, G.L., 1992, Candlestick Charting
Explained, Irwin, USA.
Murphy, J.J., 1986, Technical Analysis of
the Financial Markets, NY Institute of
Finance, USA.
26 • Summer 2013 • The Swiss Technical Analysis Journal
Murphy, J.J., 2000, Analisi tecnica
intermarket, Il Sole 24 Ore, Ita.
Nison, S., 1991, Japanese Candlestick
Charting Techniques, NY Istitute of
Finance, USA.
Nison, S., 1994, Beyond Candlesticks, Wiley,
USA.
Plummer, T., 2003, Forecasting Financials
Markets, Kogan Page, UK.
Pring, M.J., 2003, Analisi tecnica dei mercati
finanziari, McGraw-Hill, USA.
Schwager, J.D., 1990, Market Wizards,
Harper Business, USA.
Schwager, J.D., 1992, The New Market
Wizards, Harper Business, USA.
Schwager, J.D., 1996, Schwager on Futures,
Wiley, USA.
Wagner, G.S. and B.L. Matheny, 1994,
Trading Applications of Japanese
Candlesticks, Wiley, USA.
Wilder, W., 1978, New Concepts in Technical
Trading Systems, HPC, USA.
Alessandro Angeli, CFTe, MFTA
Alessandro currently covers the position of Chief
Operating Officer at T&F Asset Management
SA in Lugano, a company providing
asset management services to
private individuals and institutionals.
He is also adjunct professor of
Financial Technical Analysis at
Parma University and lecturer in
the CFTe courses at Centro di
Studi Bancari in Vezia. From 2001
until 2005 Alessandro worked as
Strategist at RCF SA, a company
providing innovative research in
the field of quantitative and technical financial
analysis.
 The Volatility-Based
Envelopes (VBE): a dynamic adaptation
to fixed width moving average envelopes
Mohamed El Saiid, MFTA
Abstract
This paper discusses the limitations of fixed-width envelopes and
introduces a new method that addresses these limitations. The new
method utilizes the concepts of standard deviation and correlation in
order to produce a dynamic adaptation to the fixed-width envelopes.
The paper also offers an example of a useful technique and some
guidelines for applying the new method on price charts. The method
will be referred to henceforth as the volatility-based envelopes (VBE).
Introduction
Fixed-Width Envelopes
Fixed-width envelopes (FWE) are two boundaries. Each boundary
is placed at a fixed percentage above and below a simple moving
average (SMA) of the exact same duration. The primary aim of using
the FWE is to contain the price action fluctuations and hence, imply
when prices have gotten over-extended in either direction. FWE are
characterized by the same effects of lag and smoothness associated
with their corresponding SMA.1
Unfortunately, due to the inherent lag effect caused by the FWE, prices
would quite often move and remain outside the envelopes’ boundaries
for a notable period of time. Despite some featured techniques adapted
for the FWE that would accommodate and sometimes even depend
on these occurrences2, the initial purpose as to contain the price action
is not satisfied.
Bryan J. Millard suggested that in order to represent the trend properly
and highlight active and dominant cycles using SMAs and FWE
respectively, the statistically-correct plot would be to shift it back from
the most recent data point by half the span of the SMA duration. This
technique is referred to as centering the moving average. The rationale
behind this argument is that since the FWE are properly plotted
(centered), the price action fluctuations will be contained within the
envelope boundaries.3
To its credit, the centered FWE manages to contain a larger amount
of price action. However, it still produces a couple of challenges. As a
result of the centering procedure, the envelopes values will terminate
n-days prior to the most recent closing price, where n = (the SMA
span – 1)/2. Moreover, the centered FWE are non-adaptive to the
continuous volatility changes of the price action. Depending on the
price volatility, this will still cause the price fluctuations to move and
remain out of the envelope boundaries quite frequently (during high
volatility phases), or not react with the envelopes at all (during low
volatility phases).
The Swiss Technical Analysis Journal • Summer 2013 • 27
Another attempt to address the FWE’s lack of adaptability to price
volatility was made in the 1980s by John Bollinger. Adopting the
statistical concept of standard deviation into the field of technical
analysis, Mr. Bollinger introduced the Bollinger Bands (B-Bands). The
B-Bands are two bands set at two standard deviations above and below
a SMA calculated off the price action. In principle, the B-Bands aim at
utilizing the standard deviation concept in order to identify rare and
unsustainable price excursions and coin them as overbought (OB) and
oversold (OS) conditions.4
The B-Bands manages to contain more price action within its
boundaries, especially during trendless phases in price action where
identifying OB and OS conditions using the B-Bands becomes quite
valuable. However, there are certain price conditions on the near to
short term horizon as explained by Bollinger, in which prices tend to
breakout and remain outside either one of the 2-standard deviation
bands for some considerable time. At other times, even if the price
excursion was relatively brief, the price gain (or loss) would be quite
considerable. These conditions will generally occur during trending
phases and following periods of low volatility in price action and
are dubbed by John Bollinger as volatility breakouts. The technique
proposed by Bollinger relies on these volatility breakouts in order
to initiate a position in the direction (favor) of the price breakout.5
Though very successful when properly identified in the price action,
these volatility breakouts seem to argue against the general notion
that price excursions occurring beyond two standard deviations are
deemed rare and unsustainable.
Sustainable price breakouts from the B-Bands are primarily attributed
to the difference in tendency and behavior of price action during
trending vs. non-trending phases. During non-trending phases,
price action visually exhibits a characteristic of oscillatory/mean
reversion motion. During these events, price excursions are rare and
unsustainable. While during trending phases, this feature becomes
less dominant and further diminishes on the near to short term
horizon as the trending phase grows stronger. This is attributed to
the lagging effect of the SMA which visually appears clearer during
trending phases. As you would recall from the B-bands calculation,
the 2-standard deviations calculated are added to and subtracted from
that lagging SMA to construct the upper and lower bands respectively.
Hence, the B-Bands do not fully resolve the lag effect of the SMA.
Although the B-Bands succeed to achieve adaptability, the upper and
lower bands do not inherit the smoothness of their corresponding SMA
as they are relatively more erratic in motion than the latter. This does
not allow them to be as suitable as centered FWE when attempting to
highlight active and dominant cycles in the price action.
Introducing the Adaptive Volatility-Based Envelopes (VBE)
Using Volatility to Achieve
Adaptability
To address the drawback associated with
the lack of adaptability of the FWE, we use
the measure of standard deviation. Unlike
B-Bands’ calculation, we use the historical
percent changes of price returns of a security
instead of the historical price action of that
security.
Since practitioners in the field of statistics
and financial engineering have consistently
hypothesized over the past decades that the
percent changes in a stock price (or security)
are normally distributed on the short term.6
Hence, we use this hypothesis as the basis for
the VBE calculation methodology; once the
standard deviation calculations were complete,
the outcome was added to and subtracted
from a SMA of the percent changes of price
returns. Then, the outcome was added to/and
subtracted from today’s (the most recent)
closing value on a percentage basis and not
over a lagged SMA of the price action. As a
result, a dynamic adaptation to the envelopes’
boundaries can be achieved, while avoiding
the inherent lag effect of the MA of prices.
The following steps will explain the VBE’s
calculation methodology:
Step 1: Calculate the standard deviation (σ)
of the percent changes (or logarithm) of the
daily historical price returns (σ).
The standard deviation is calculated over
duration of 21 daily percent change values.
Step 2: Calculate the values of the raw
Volatility-Based Envelopes (raw VBE).
The lower VBE = Centered (WMA (Close*(1
+ (μ - (σ*2 Standard Deviation))), WMA-
Period), N)
The upper VBE = Centered (WMA
(Close*(1+ (μ + (σ*2 Standard Deviation))),
WMA-Period), N)
Example:
Assuming the following data:
The last given price (S) of the NASDAQ Index
is: 2,190.
The simple average (μ) of the percent change
is: 0.07%.
The (σ) of the daily percent change is:
1.00%.
28 • Summer 2013 • The Swiss Technical Analysis Journal
Therefore, we can expect that approximately
95.4% of the daily percent change movements
to be maintained within the percentage range
of:
0.07% – (1.00% * 2) = – 1.93% (at 2 standard
deviation).
0.07% + (1.00% * 2) = + 2.07% (at 2 standard
deviation).
In order to translate those values into a price
range for most recent closing value of the
index, or in other words; the raw VBE, then:
2,190 * (1-1.93%) = 2,147.7 (lower raw
envelope at 2 standard deviation).
2,190 * (1+2.07%) = 2,235.3 (upper raw
envelope at 2 standard deviation).
Plotting the raw VBE over the price chart
Using the same calculation method presented
above, we can regress and calculate a daily
range for all previous historical closing values
of the S&P 500 Index and then plot the
outcome as shown in Figure 1.
Figure 1 depicts the S&P 500 Index line chart
with daily closing values and the raw upper
and lower boundaries of the calculated raw
VBE. As observed, there exists a strong (almost
identical) similarity between the closing values
(line chart) of the S&P500 Index and both;
the upper (red) and lower (blue) boundaries
of the calculated raw VBE. Having said that,
both boundaries are choppy (raw), as with the
Upper boundary of the volatility
range at 2 standard deviations
Figure 1 – S&P 500 Index – Line chart – Daily closing values – Normal scale
case of the index movement. Thus, a need to
smooth out these boundaries is required.
Step 3: Smooth the raw VBE using weighted
moving averages.
In order to smooth out the raw VBE, we will
use two centered weighted moving averages
(CWMA) for both envelopes of the raw
VBE. Using CWMAs instead of CSMAs
mathematically results in a reduction of lag-
time by approximately 40%. This means that
instead of lagging the most recent price by
(span-1)/2 as with the case of the SMA, the
lag is reduced to be approximately equivalent
(span-1)/3.34. 7
In real life observations and mainly due to the
non-linear nature of price action, the lag tends
to be reduced down to equate (span-1)/4
instead of (span-1)/3.34. This means that – in
real life price action – the lag of the 21-period
WMA tends to approximate to 5-periods (and
in some cases, 4-periods), but not 6-periods.
Table 1 features CWMAs of different spans and the
amount of lag attained by each
CWMA Lag
span periods
21.00 5.00
17.00 4.00
13.00 3.00
9.00 2.00
5.00 1.00
2.00 0.25
S&P 500 closing
values
Lower boundary of the volatility
range at 2 standard deviations
 The Smoothed Volatility-Based
Envelopes (VBE)
Now let us make a visual comparison between
the smoothed VBE vs. both the centered FWE
and the B-Bands. This comparison is shown in
Figure 2.
Figure 2 visually depicts the advantages of the
VBE over the centered FWE and the B-Bands.
The centered FWE failed to mechanically adapt
to volatility changes during the movements of
the S&P 500 Index, while the VBE was able
to contract and expand in accordance to the
decrease and increase in volatility of the S&P
500 Index movements. Meanwhile, unlike the
B-Bands, the VBE maintains its boundary
smoothness, relative to the corresponding
moving average of the price action. And
finally, the VBE managed to contain more
price action than the B-Bands. The VBE is
constructed with the primary advantage of
its ability to identify overbought (OB) and
oversold (OS) conditions in the price chart
regardless of the trend status.
Step 4: Forecast the VBE’s missing data points
using correlation.
Using (ρ) to Forecast the Missing
Data Points of the 21-Day CWMA
As previously explained, the 21-CWMA has
5 missing data points, while the 17-CWMA
has only 4. This means that we can use the
last given value of the 17-CWMA and the
(ρ) value of both variables from table (2)
to forecast the 1st missing value of the 21-
CWMA as follows:
Example:
Referring to the data used in calculation,
the last calculated percent change of the 17-
CWMA was 0.80%.
The last calculated value of the 21-CWMA
was 1,122.30.
The calculated (ρ) value was 0.88 or 88%
(from Table 2).
VBE are more receptive to any
volaility changes in price action
Then, the forecast of the 1st missing value of
the 21-CWMA would be:
1,122.40 * [1 + (0.80% * 0.88%)] = 1,130.38
This value would be placed shifted back from
the most recent closing value of the index
by 4-days (since the 17-CWMA has only 4
missing data points).
Moving onwards, the following table (Table
3) shows the last calculated percent changes
of the 13, 9, 5 and 2 CWMAs as well as the
forecast of the 2nd, 3rd, 4th and 5th (i.e. last)
missing values of the 21-CWMA.
Using that same concept, we can now forecast
the five missing data points of the smoothed
VBE.

To be able to forecast the missing data points

of the VBE, we will use both the CWMA
Price excursions from the VBE
feature previously presented in Table 1, as are less than that of the B-Bands
well as the statistical concept of correlation
(ρ). The aim is to use the correlation between CMA Envelopes are not sensitive
to the volatility changes in prices
the values of other CWMAs of lesser span
(independent variables) with the 21-period
CWMA or smoothed VBE (dependant
variable) to forecast the missing data points
of that smoothed VBE. It’s worth mentioning The upper and lower B-Bands
that all CWMAs of lesser span are selected are more volatile in action than
their corresonding MA
with reference to the amount of their missing
data points.
Example:
Using the daily values of the S&P 500 Index,
we calculate (ρ) matrix of the daily percentage
Figure 2 – S&P 500 Index – Candlestick chart – Daily closing values – Normal scale
change of a 21-day CWMA vs. the daily
percentage change of a 17-day, 13-day, 9-day,
5-day and a 2-day CWMA over the most recent Table 2
63-actual data points as shown in table 2. S&P 500 Index – correlation coefficients (ρ) of 21, 17, 13, 9, 5 and 2-day % change of CWMAs

21-CWMA 17-CWMA 13-CWMA 9-CWMA 5-CWMA 2-CWMA

21-CWMA 1 0.88 0.76 0.67 0.56 0.31

Table 3

13-CWMA 9-CWMA 5-CWMA 2-CWMA

0.86% 1.07% 0.93% 0.80%
1,137.80 1,145.99 1,151.90 1,154.77

The Swiss Technical Analysis Journal • Summer 2013 • 29

Figure 3 visually depicts the smoothed VBE
(at 2-standard deviation) with a forecast of its
missing five data points using the correlation
methodology previously presented.
The VBEs
Using the VBE to identify over-extended price Actual VBE values
forecasted interval
action on the price charts
Now that the VBE has been constructed, we
will demonstrate a useful trading technique
when applying it on price charts. Below are
some essential guidelines to be followed when
using the VBE.
• Spot the most recent turning phase of the
VBE (crest or trough) while it is occurring.
The turning phase must be associated with
a price excursion. The VBE will guarantee VBE
estimates
to a high degree that any price excursions
are unsustainable regardless of the trend.
• If a price excursion occurred at a low, wait
for the price to return back inside the VBE Figure 3 – S&P 500 Index – Candlestick chart – Daily closing values – Normal scale
range, and then initiate a long position (or
buy-back an old short position) until the
next VBE turn (in the opposite direction)
takes place.
• If a price excursion occurred at a high, wait
for the price to return back inside the VBE
range, and then short, sell or reduce your
position until the next VBE turn (in the
opposite direction) takes place.
Needless to say, the appropriate trading
strategy applied will depend on the direction
of the overriding trend direction.
Figures 6 and 7 illustrate how to initiate buy
and sell trades using the VBE.

A buy signal is generated when prices

break out of the lower envelope, and
then reverted back inside

Figure 4 – EGX 30 Index – Candlestick chart – Daily closing values – Semi-log scale

A sell signal is generated

when prices break outside
the boundary of the VBE
and resume back inside

Figure 5 – EGX 30 Index – Candlestick chart – Daily closing values – Semi-log scale

30 • Summer 2013 • The Swiss Technical Analysis Journal

Conclusion
The VBE introduced in this paper manages to
dynamically adapt to the volatility changes of
the price action and thus, successfully contains
the price action within a predefined standard
deviation range. Accordingly, the VBE is
consistently able to identify over-extended
price action regardless of the trend status.
This is achieved without compromising the
smoothness of its boundaries.
Nevertheless, the VBE is still left with a few
challenges. Most importantly, is the fact that
the most recent data points on the smoothed
VBE are missing and were required a
forecast. In this paper, we used the concept of
correlation and applied it to moving averages
of different durations in order to achieve a
reliable forecast for the missing data points.
Still, the correlation figures tend to lose their
significance as they approach zero, since a
value of zero implies no correlation between
the variables. Thus, the significance of the
VBE estimated values will vary depending
on the significance of the correlation figures
Figure 6 – NASDAQ Index – Candlestick chart – Daily closing values – Semi-log scale
Figure 7 – NASDAQ Index – Candlestick chart – Daily closing values – Semi-log. scale
The Swiss Technical Analysis Journal • Summer 2013 • 31
which tend to change more often than not.
Thus, one should always check the (μ) matrix
values for statistical significance (i.e. at least
above 0.5 and/or below -0.5).
References
1 Murphy, John J., Technical Analysis of the
Financial Markets, New York institute of
Finance, 1999.
2 Pring, Martin J., Technical Analysis
Explained: The Successful Investor’s Guide
to Spotting Investment Trends and Turning
Points, McGraw-Hill, 2002.
3, 7 Millard, Brian J., Channels and Cycles: A
Tribute to J. M. Hurst, Traders Press, 1999.
4, 5 Bollinger, John A., Bollinger on Bollinger
Bands, McGraw-Hill, 2001.
6 Hull, John C., Options, Futures, and Other
Derivatives, Prentice Hall, 2000.
Buy
Stop-Loss
here
Reduce here
Bibliography
• Hull, John C., Options, Futures, and Other
Derivatives, Prentice Hall, 2000.
• Mason, Robert D., Marchal, William G.,
Lind, Douglas A., Statistical Techniques in
Business & Economics, McGraw-Hill/Irwin,
2002.
• Millard, Brian J., Channels and Cycles: A
Tribute to J. M. Hurst, Traders Press, 1999.
• Bollinger, John A., Bollinger on Bollinger
Bands, McGraw-Hill, 2001.
• Murphy, John J., Technical Analysis of the
Financial Markets, New York Institute of
Finance, 1999.
• Pring, Martin J., Technical Analysis
Explained: The Successful Investor’s Guide
to Spotting Investment Trends and Turning
Points, McGraw-Hill, 2002.
• VIX White Paper, Chicago Board Options
Exchange (CBOE), 2009.
• Data courtesy of Bloomberg and Reuters.
• Charting software courtesy of Equis
International MetaStock v.9.1.
Mohamed El Saiid, MFTA, CFTe
Mohamed El Saiid is currently an Executive
Director and Head of the Technical Analysis
department for HC Brokerage (HCB), Cairo,
Egypt. He started his career working for
Momentum Wavers, Ltd., a Middle East
Technical Analysis firm
(2001-2004). He joined
HCB as an associate/lead
technical analyst (2004-
2006). Later, he joined
Unifund, a Geneva-based
global private fund (2006-
2007) as a Chief Technical
Strategist/Co-Fund
Manager to the Middle
East investments.
Mohamed holds an MBA in Finance and
is currently a Board Member, Technical
Analysis instructor in the Egyptian Society
for Technical Analysts (ESTA), as well as an
Education sub-committee Member and a
Board Nominating committee Member in IFTA.
Mohamed authored several TA-related articles
and developed several indicators including
the Volatility-Based Envelopes (VBE) and the
Implied Volatility Projection Range (IVPR).
This article was originally published in the
2012 IFTA Journal.
 l Zürich

Zurich
Chapter
event
25 june 2013

Technical Analysis Trading

- Algorithmic or Discretionary

Presenter, Henrik Mikkelsen

32 • Summer 2013 • The Swiss Technical Analysis Journal

 Markets made easy
Jean-François Owczarczak, CFTe

Increase Technical Analysis Penetration
Ninety five% of the people that have access to
technical analysis don’t use it. Why so ?
Despite the fact that technical analysis platforms
are becoming more powerful every day, most
products remain quite sophisticated and in
general are still reserved to the seasoned and
professional elite. There seems to be a scarcity
of value-added tools targeted at the newcomers,
private investors or the time and technology
constrained.
Since 1969, Management Joint Trust SA (MJT)
has been advising institutional investors using
its proprietary Technical Analysis methodology
focused on Trends, Targets and Timing.* It is well
aware of the on-boarding and communication
constraints inherent to technical analysis (with
each new user, the methodology needs to
be taught, coached and regularly supported
through face to face contact). This tailor made
model is adapted to institutional business.
Now, What if You Were Targeting the
Masses?
In order to increase penetration of and facilitates
access to technical analysis, MJT launched
its new FinGraphs platform in 2012. Simple,
didactic and visual, FinGraphs is aimed at
a large audience of market participants and
delivers a powerful yet simple decision making,
market monitoring and tutoring tool. It is a
simplification of MJT’s institutional methodology
with a large portion of the value added having
been retained.
* (3T methodology as referenced in the Market
Technician, No 70, June 2011, available on our
website www.fingraphs.com in Home / About Us
/ Press Releases)
simple, visual and didactic way, using a pre-
parametered standardised methodology over all
asset classes and frequencies of observation.
Define Your Investment Horizons:
No financial decision can be taken without
an investment horizon. Hence, there are no
universal bear or bull indications. Each market
participant must chose or adapt to a specific
time frame which fits his investment style,
return objectives, disponibility, transaction
costs or simply character. FinGraphs displays
frequencies ranging from historical Weekly and
Daily charts to Live Streaming Intrahour (up
to an automatic update every 5 seconds). In
order to lead users to view time frames which
are adapted to their profile, it has categorized
these into different styles, each corresponding
to a combination of three frequencies:
l Investor’s View (historical Weekly, Daily,
Hourly),
l Trader’s View (historical 60 min, 15 min, 4
min),
l Scalper’s View (live streaming 4 min, 60
seconds, 15 seconds),
l Super Scalper’s View (live streaming 60
seconds, 15 seconds, 5 seconds).
Most users will focus on the Investor’s View
where the investment horizon is measured
in quarters down to weeks. More active
participants will choose the Trader’s View
for Intra-week, Inter-day market positioning.
Finally, if your style keeps you in front of your
trading screens during the day, you’ll probably
end up using the Scalper’s and Super Scalper’s
views for true decision-making content up to an
update every 5 seconds.
Visual Presentation Over Three
Frequencies:
Within each investment horizon (Investor’s,
Trader’s or Scalper’s), FinGraphs presents an
analysis over three frequencies of observation.
The purpose of this multi frequency presentation
is to teach and encourage users to coordinate
their analysis over different time frames by putting
them into perspective. Hence, the upper half of
each FinGraphs chart pictures a summary chart
of price history upon which three rectangle time
windows have been superimposed (labelled 1:
Long term, 2: Medium term, 3: Short term).
The bottom half of each FinGraphs chart
then presents these three rectangles (still
labelled 1,2,3 and called “Time Boxes”) in a
standardised format presentation for a quick

Focus on the Essentials

The platform pushes simple concepts that will
help end-users focus on the essential elements
of their financial decision making process:
l Define your investment horizon: are you an
Investor, a Trader, a Scalper?
l Within your investment horizon, view three
time frequencies put into perspective
(“Fractal made easy”)
l Use simple instruments (bull/bear trend
indications, visual price targets, oversold/
overbought risk oscillator, support/resistance
levels using market stress)
l Standardised methodology over all
investment horizons and asset classes
l Entertaining Coaching section using the
“Driving a car / road signs” analogy
i.e. put all elements needed for financial
decisions onto a single chart, presented in a
Copyright ©2012 - Management Joint Trust SA - www.FinGraphs.com

The Swiss Technical Analysis Journal • Summer 2013 • 33

“at a glance” analysis differentiated over three
different time frames. Although, the different
time frames are not related by fixed multiple
factors, it is like a “fractal view” made easy with
the same methodology being applied to all three
frequencies.
Our coaching section compares this presentation
to a roadmap: for example on the investor’s view
the long term (weekly) is similar to a smooth
ride on the highway, the medium term (daily) is
compared to a main road with two way traffic
and more halts and road signs. finally, the short
term (hourly) is like driving on secondary roads,
it implies shorter distances, multiple stops and
many signs.
This visual multi frequency presentation
combined with FinGraphs’ simple indicators
allows for a quick “at a glance” analysis of any
instrument. To say the least, it is very efficient
way to quickly get a first impression / opinion on
any instrument, on any time frame.
Simple Trend Indications
Trend indications are represented by Bull and
Bear figurines on each FinGraphs time box.
These are labelled with subtle “Think Positive”
/ “Think Safety” mottos as trends are a function
of current and prior direction, not a hard
recommendation of future price evolution.
FinGraphs “Bull” and “Bear” indications are
calculated based on the direction of FinGraphs
standard deviation envelopes and to a large
extend on the direction of the larger one of them
(the big yellow envelope). Its direction, which
has been used for more than 30 years in many
of MJT’s algorithms, shows strong inertia, i.e. it
is a very stable trend indicator.
Using these figurines, the user can get a first
impression of trends in seconds (Long /Medium/
Short term: Bull/Bull/Bear or Bear/Bull/Bull,
…) and hence better understand how major,
secondary, minor trends interplay.
34 • Summer 2013 • The Swiss Technical Analysis Journal
Visual Targets
To evaluate how well established and how far
out trends are in their development, the Bull and
Bear trend analysis is completed with colourful
price targets beams, green for uptrend or red
for downtrend. These end with an ellipse
representing the probable price target zone
(measured in terms of potential price range as
well as time horizon period).
The price targets element is calculated based
on MJT’s traditional measure of historic volatility,
i.e. the width of its larger dark yellow standard
deviation envelope (or “delta”). The calculation
involves factoring this volatility by specific
pre-set factors and then adding the result to
a significant Top or Bottom to obtain potential
price targets for the current price move. Setting
these prices targets is a progressive process.
Every price move starts as being a correction.
Its rebound potential is usually 0.5 to 0.8 times
“delta” from the last turning point. Once a price
move makes it above the 0.8 times “delta” mark,
it turns impulsive and has a strong chance of
achieving its impulsive targets (1.3 to 1.7 times
“delta” from the last important turning point).
In rare occasion, for very strong moves super
impulsive price targets are calculated (2.3 to 2.7
times “delta”).
Copyright ©2012 - Management Joint Trust SA - www.FinGraphs.com
Time projections of these targets are drawn from
a standardised measure of how long corrective
or impulsive price moves should normally last.
These measures, which have been part of the
MJT toolkit for years, are then adapted to fit
each time horizon.
Visually, these price beams give a great sense
of direction (red or green) and of how much
potential is left in a price move (measured both
in price and time potential). Combined with
the Bull and Bear indications, they provided
a precise and rapid assessment of the trend
status over the three frequencies presented.
Risk Indicator and Market Stress
Bull/Bear indications combined with target zones
offer a great trend following monitoring tools.
Many FinGraphs users will probably stop here in
their analysis. FinGraphs, however, presents two
other indicators measuring exaggerations (the
risk indicator) and market stress (stress points
between the larger and smaller envelopes).
FinGraphs’ risk indicator is a bounded oscillator
which moves from overbought to oversold.
Traditionally, MJT uses six oscillators per graph
calculated over different time frames. For
FinGraphs, it has retained only the longer term
one to obtain less frequent but more robust
exaggeration signals.
Market stress is measured when the shorter term
white envelope contacts with the boundaries of
the longer term dark yellow envelope. These
contact points indicate that the short term
trend has gone too quickly versus the longer
term trend. A consolidation or a correction is
imminent.
Taken separately, these two indications offer
tentative top or bottom fishing opportunities
MJT’s Risk Indicator
MJT’s Market Stress
against the prevailing trend. However, when Global Coverage for “All Investors and have no limitations in terms of market delays.
used together, in an attempt to synchronise risk Traders”: Hence, they allow FinGraphs to create its short-
exaggerations and market stress, the resulting FinGraphs market coverage is extensive with term Scalper’s and Super Scalper’s views
turning points are very robust, often preceding more than 5’000 instruments worldwide over all as well as high frequencies market mosaics.
trend following instruments in signalling the asset classes (single stocks, market and sector Private day-traders as well as professionals will
emergence of a new trend. Combining these indexes, futures, trackers, Forex, swap rates, find great value for money in these short term
two instruments with price target exhaustion benchmark bond yields and commodities). decision making live streaming charts. Graphs
offers even stronger probabilities of reversal. This basic coverage is presented in delayed running Dukascopy prices (a Geneva-based
format except for FX which is displayed in real- FX broker) are already available through the
As described on the facing page, the FinGraphs
time. For newcomers, it is a unique platform to platform covering 60 FX pairs as well as gold
methodology is simple and visual.
discover the world of investments and decision and silver. Several other providers are currently
It helps you position yourself very rapidly making in a simple and didactic format. For being integrated. They will bring additional
on each frequency by identifying trends and experts, it is a great screening and monitoring coverage on CFDs (equity indexes, bond and
evaluate their potential in terms of rewards tool, at retail cost, to scan the world for ideas, commodity futures) as well as on major Blue
and risks. Add the fact that you are constantly correlations and relative opportunities. Chips worldwide.
working with three frequencies and you have a
FinGraphs also integrates feeds from various
true financial GPS.
brokers and OTC exchanges. These usually
Additional Market Monitoring Features
FinGraphs also displays market components in
a mosaic format. These mosaics can be set to
include 4-16 instruments per page on a specific
frequency (weekly to 5 secs). They are derived
either from index constituents, pre-set lists
by asset classes or the users’ own favourites
selections.
On longer frequencies (e.g. weekly, daily),
Mosaics are ideal tools to monitor market
breadth, identify correlations or search for
outliers/opportunities. The short term mosaics
based on Intrahour frequencies are great
monitoring tools for intraday price moves (live
streaming).
Finally, for users with benchmarking needs,
FinGraphs also proposes relative charts for
most stocks against their reference market and
sector indexes.
Copyright ©2012 - Management Joint Trust SA - www.FinGraphs.com

Copyright ©2012 - Management Joint Trust SA - www.FinGraphs.com

The Swiss Technical Analysis Journal • Summer 2013 • 35

Education for Traders
In the online trading world, there is an increasing
demand from brokers for educational material
and simple trading methodologies. The intention
is to help clients trade more successfully in
order to increase their life time in the markets
and retain them as clients over a longer
period. With its simple and didactic approach,
FinGraphs offers an integrated answer which is
both scalable and adaptable.
Front Office Solution for Bankers
– Communication
FinGraphs is also the ideal instrument to create
a dialog between a banker and his clients.
FinGraphs offers Front Office Bankers and
Advisory desks packages of multiple accesses
which can be distributed to team members
or clients using simple and confidential
administrative functions. Using its simple
methodology, bankers and clients will be able to
discuss on common ground. In addition, these
packages also include a Client Relationship
Management tool (CRM): it allows an “account
master” (banker) to view all queries done by
his affiliated users (clients) on the platform.
This information is structured into a client
profile, accessible on-line and pint-pointed to
understand a client’s centres of interest in a
matter of seconds, a powerful advisory tool to
deliver more targeted advice.
FinGraphs is a financial graphics platform conceived to make markets easy for all Investors and Traders (private and institutional).
3 Time Dimension Graphs Trends Identification
36 • Summer 2013 • The Swiss Technical Analysis Journal
Simple Concept – Flexible Technology
FinGraphs’ standard offering is available
through the www.fingraphs.com website. More
generally, the FinGraphs concept can easily
be adapted to any markets or trading offering
(e.g. trading platforms, paper media, blogs or
financial websites). Our team is at your disposal
to answer any questions and evaluate feasibility
(support@fingraphs.com).
Jean-François Owczarczak, CFTe
In 2003, after 5 years in investment banking
at Paribas and Deutsche Bank in London,
Jean-François joined Management
Joint Trust SA, Geneva. Today, he
acts as Chief Investment Officer
and Head of Business Development
for the company.
He holds a Master in Business from
the University of St Gallen (lic. Oec.
HSG 1997) as well as the Certified
Financial Technician certification
(CFTe) and is a Bronwen Wood Prize Winner.
He is also a member of the Swiss and UK
societies of technical analysts.
The market coverage is global:
5'000 financial instruments worldwide including
4'000 single stocks, country, regional and sector indexes,
Forex, Interest Rates, Commodities and Trackers
“ Easy to use ” decisional tool with:
3 Time Dimension Graphs – Trends Identification – Targets
Estimates – Risk Indicators – Price Exaggeration
Real Time Live Streaming on Forex – Gold – Silver
Subscription Terms www.fingraphs.com
from CHF 60. - per month
Management Joint Trust SA
Rue de Hesse 1 – PO Box 5337
1211 Genève 11 – Switzerland
T + 41 22 328 93 33
F + 41 22 320 07 04
www.mjt.ch
www.fingraphs.com
Targets Estimates Risk Indicator Price Exaggeration
 SAMT
Achievers
Gregoire Genolet, CFTe
I discovered technical analysis during my
trainee program in asset management.
I understood quickly the benefit of this
art that is unfortunately not taught at
university.
Technical analysis helps me to understand
the market, and I think, if you can manage
it with fundamentals, you’ll reduce the risk
of mistake.
What value does the CFTe qualification
provide within your career?
The CFTe diploma allowed me to expand
my knowledge and the course helped me to
structure my analysis.
The Swiss Technical Analysis Journal • Summer 2013 • 37
Jeremie Girod, CFTe
After a master in Economics obtained in Paris
(1995), a military service as a lieutenant
in France (1996) and a first professional
experience in the tourism industry in Chile
during 1997-1998, I started my career in
finance in 1999. I first managed the back
office and the risk management department
of a derivative-trading firm based in Ireland.
I then moved to Switzerland in 2001 to work
on the SMI market as an option market maker.
I enjoyed market making a lot but at the same
time I became more and more attracted with
real commercial activities and decided to move
into commodity. I trade and merchandise grain
and oilseeds since 2005, and I am enjoying it
a lot!
How do you feel about achieving your
CFTe diploma?
Really accomplished now with the last
education I needed to complete my numerous
set of skills and experience.
How useful was our SAMT Geneva CFTe
Immersion Course in helping prepare for
the exam...?
Very useful. It help me to focus my attention
and effort in the right direction which is key
given the wide range of theories and tools
developed in technical analysis.
What value does the CFTe qualification
provide within your career?
An important and key knowledge which has
been achieved thanks to the high objectives
set by the exam. And finally an official
recognition within the industry.
Markus Ilg, CFTe
1998-2006 Buy-side analyst and fund
manager at WestLB Mellon, Düsseldorf
2006-present Head of Portfolio Management
at Union Bancaire Privée, Zürich
How you feel about achieving your CFTe
diploma?
I feel great. I am very happy that I made both
exams in the first trial.
How did you develop a successful
strategy in preparing for the exam...?
I started to prepare a long time ago. In 2010
I read the Murphy. And I thought about
taking the exam.
It was the year of the soccer world
championship. So, I gave up my plans to take
the exam (soccer is very popular in Europe).
Time goes by...
In 2012 I thought again about the CFTe.
It was the year of the European soccer
championship...so, that time I decided to
prepare for the exam after the championship.
My advice: it’s important to include key
events in your exam preparation planning ;-)
What value does the CFTe qualification
provide within your career?
Accreditation of professional knowledge is
becoming more and more important. It is
not enough anymore that you believe you
have the necessary knowledge in technical
analysis. It’s important that you can prove
it. I hope that more and more technical
analysts realise that. It’s surprising that there
are professional technical analysts that don’t
have any professional accreditation.
 SAMT
Achievers
Bertrand Clavien, CFTe
Bertrand Clavien started his carrier at Darier
Hentsch & Cie in 1997, after which he joined
Bordier & Cie’s private banking department
followed by the Hedge Fund & business
development team before heading to Monaco to
chair the investment committee as well as create
and manage the internal Equity and Alternative
Funds. He is currently back in Geneva as senior
portfolio manager.
Bertrand Clavien graduated from the University
of Geneva with a Certificate of Advanced
NEXT CFTe Course Studies in Quantitative Portfolio Management
7-8 September and also holds a CFTe.
See page 40 for details.
How you feel about achieving the CFTe
diploma?
se Happy, it is an accomplishment that pushes
Cour
m e rsion me to delve deeper into the field of technical
II Im 2013
CFTe June analysis.
How useful was our SAMT Geneva CFTe
Immersion Course in helping prepare for
the exam...?
It was enriching as we shared differing
point of views and approaches, pushing me
out of my comfort zone in using technical
analysis while also understanding the exam
methodology.
Ron and Bruno truly dedicated themselves to
giving their best to this course.
What value does the CFTe qualification
provide within your career?
CFTe
II Imm An extra string to my bow. Technical analysis
ersion
Cours
March
2013 e allows me to enhance my knowledge in
market analyses, which is a considerable
advantage in the current competitive
environment. It also brings me closer to my
clients as they generally feel more at ease with
an explanation based on technical analysis as
opposed to fundamental analysis.
38 • Summer 2013 • The Swiss Technical Analysis Journal
Jean-Francois Owczarczak, CFTe
In 2003, after 5 years in investment banking at
Paribas and Deutsche Bank in London, Jean-
François joined Management Joint Trust SA,
Geneva, as Chief Investment Officer and Head
of Business Development.
He holds a Master in Business from the
University of St Gallen (lic. Oec. HSG 1997)
as well as the Certified Financial Technician
certification (CFTe) and is a Bronwen Wood
Prize Winner. He is also a member of the Swiss
and UK societies of technical analysts.
How you feel about being awarded the
Bronwen Wood prize?
“A bit surprised and very honored. It is also
great news for the family as I represent the
third generation of technical analysts in our
family.”
How did you develop a successful strategy
in preparing for the CFTe exam...?
“Read the books, summarized them, did all
the previous exams. On the day of the exam,
think like an advisor as most questions are
taken out of real life examples and often
relate to current dilemmas in the market. In
this respect, reading up on current market
publications also helps.”
What value does the CFTe qualification
and the Bronwen Award provide within
your career?
“We run our own market advisory firm in
Geneva using our own approach to TA. The
Bronwen Wood Award is an outstanding
recognition for us. Personally, I’ve been
advising clients day-in day-out for 10 years;
CFTe was essential to broaden my TA
knowledge (anyways, more a pleasure than a
duty). It’s also great to be part of the CFTe
holders here in Switzerland with the SAMT
currently showing great “momentum”.”
 SAMT Board
of
Directors
Daniel Stillhart
& Officers President
daniel.stillhart@frankfurter-bankgesellschaft.ch

Patrick Pfister, CFTe Ron William, CMT, MSTA

Vice President and Vice President and
Head of Zürich Chapter Head of Geneva Chapter
trading_patrick@yahoo.com ronwilliamPR@gmail.com

The Swiss Association The Swiss Association of

of Market Technicians Market Technicians (SAMT)
Founded 1987 is a non-profit organisation
(Civil Code Art 60ff) of market
analysis professionals in
Switzerland, founded in 1987. SAMT is a member of the
International Federation of Technical Analysts (IFTA).
Technical analysis is the study of prices and markets. It Alberto Vivanti Mario Valentino Guffanti, CFTe
Vice President and Assistant Vice President
examines price behavior on an emprirical and statistical basis. Head of Lugano Chapter of Lugano Chapter
It extends to the study of all published information on price vivanalysis@bluewin.ch mario@guffanti.net
trends, volatility, momentum, cycles and the interrelationship
of prices, volume, breadth, sentiment and liquidity. A
comprehensive understanding of technical analysis requires
a knowledge of statistics and pattern recognition, a familiarity
with financial history and cycles.
SAMT encourages the development of technical analysis
and the education of the financial community in the uses
and applications of technical research and its value in the
formulation of investment and trading decisions. SAMT has a
Louis Grosjean Tim Straiton, FGA
wide range of activities including: Head of Treasury Head of Website Development
n Organising meetings on a broad range of technical subjects louis@grosjean.ch info@stoploss.ch
encouraging the exchange of information and knowledge
of technical analysis for the purpose of adding to the
knowledge of its members.
n Preparing its members to sit for the Certified Financial
Technician (CFTe) exams and the Masters level degree
Master of Financial Technical Analysis (MFTA) in
Switzerland. These exams are controlled by IFTA.
n Developing CFTe preparatory courses.
Marco Zahner
Auditor
ma_zahner@bluewin.ch

The Swiss Technical Analysis Journal • Summer 2013 • 39

 THE Swiss
technical
analysis
journal
The Swiss Technical Analysis Journal
is a quarterly publication established
by The Swiss Association of Market
Technicians (SAMT). It is compiled
by a committee of SAMT colleagues.
The Swiss Technical Analysis Journal
is essential reading for academics,
students and practitioners of technical
analysis in all arenas. It is an excellent
reference source for anyone interested
in technical analysis, containing a
wealth of resource material.
Credibility And Recognition
The Swiss Technical Analysis Journal
has original contributions from its
members covering developments in
technical analysis in global markets.
The Journal’s aim is to reach leading
practitioners and students of technical
analysis throughout the world.
The Swiss Technical Analysis Journal
is a professional resource. Its online
publication on the SAMT website will
make its work available as a future
resource to the community of technical
analysts.
Topics
SAMT is seeking papers that cover
developments impacting, either directly
or indirectly, on the field of technical
analysis; they may be drawn from such
areas as:
• Basic market analysis techniques
• Indicators—sentiment, volume
analysis, momentum, etc.
• Global and intra-global technical
analysis
• Styles of technical analysis
• Data
• The changing role of technical
analysis in the investment
community.
40 • Summer 2013 • The Swiss Technical Analysis Journal
We would especially like to see
contributions that draw from areas not
previously examined, and/or topics
tangential to technical analysis.
The above list is just a guide and should
in no way be considered restrictive. We
wish to make the Journal open to new
and innovative ideas from all areas
of technical analysis and those that
connect with it.
Submitting Contributions
Submission of contributions to
ronwilliamPR@gmail.com
Language
Contributions must be submitted in
English with British grammar required.
Writing Style
Papers should be written in a thesis
style.
References
All texts referred to in the paper must
be appropriately referenced with a
bibliography and endnotes (footnotes
will not be accepted.)
Responsibility for the accuracy of
references and quotations is the
author’s. We expect the authors to
check thoroughly before submission.
All references are to be included as
endnotes. No separate list of references
or bibliography should be provided.
Figures, Charts and Tables
Illustrations and charts must be referred
to by Figure Number and source (when
applicable). Tables must be referred to
by Table Number and source.
Length of Contribution
Papers should be approximately 1,200
to 3,000 words, with supporting graphs
and charts.
Format
We ask for submission in MS Word or
other text format. PDF format will not be
accepted. Charts and graphs may be in
gif or jpeg, but we ask that authors also
keep a tif format in case it is required.
Material deadline for the
Autumn 2013 issue
30 September 2013
Advertising
The Swiss Technical Analysis Journal
is published three times a year and is
published in A4 size, in pdf format only.
SAMT will accept advertisements in
this publication if the advertising does
not interfere with its objectives.
The appearance of advertising in SAMT
publications is neither a guarantee nor
an endorsement by SAMT.
Advertising Policy
Advertising is subject to approval by
SAMT. All advertisements must be
non-discriminatory and comply with all
applicable laws and regulations. SAMT
reserves the right to decline, withdraw
and/or copy edit at their discretion.
Every care is taken to avoid mistakes,
but responsibility cannot be accepted
for clerical error.
Advertising Rates
Rate Size
Inside covers 750 CHF 21.0 x 29.7 cm
Full page 500 CHF 19.3 x 26.9 cm
1/2 page 350 CHF 19.3 x 13.4 cm
Payment
Pre-payment by wire transfer is required
for all ads. Bank details will be provided
upon request.

Samt encourages the development of
technical analysis and the education of
the financial community in the uses and
applications of the technical research
and its value in the formulation of
SAMT investment and trading decisions.
SAMT offers the following benefits:
Membership
n The organisation of meetings on a
broad range of technical subjects
encouraging the exchange of
information and knowledge of
technical analysis for the purpose
of adding to the knowledge of the
members.
n The organisation of presentations
from guest speakers from around
the world.
n The possibility to sit for the Certified
Financial Technician(CFTe) exams
at a discounted rate. These exams
are controlled by IFTA.
n The “IFTA Update” - a quarterly
newsletter from the International
Federation of Technical Analysts.
n Access to the SAMT database
covering trading strategies, chart
pattern recognition, technical
indicators and a glossary of terms.
n A generous discount on the annual
IFTA Conference admission fee.
The Cost of Membership
n Initial one time registration fee of
CHF 50.
n Annual membership fee of CHF
150. (The total cost for the first year
is CHF 200.)
n Only fully paid-up members have
access to the member area.
n The subscription cost for each
subsequent year is CHF 150.
n Subscription expiry results in
blocked access to the member
area. A standing annual payment
order is therefore recommended.
Subscription Payments
Please use the Register Here link
below for executing your payment and
don’t forget to make sure your name is
mentioned in the payment (especially
for members whose subscription is
paid by/through their employers).
Also please note that by registering as a
member of SAMT you declare that you
have read, fully understand and agree
to the content of the SAMTDisclaimer
statement which appears below.
Payments are made to:
Swiss Association of Market Technicians
S.A.M.T.
Swiss Postal account Nr. 80-52569-5
IBAN: CH77 0900 0000 8005 2569 5

Register Here

SAMT Disclaimer
The Swiss Association of Market Technicians (SAMT) is a not-for-profit organization that does not hold a Swiss Financial Services License. It is the aim
of the SAMT to promote the theory and practice of technical analysis, and to assist members in becoming more knowledgeable and competent technical
analysts, through meetings and encouraging the interchange of materials, ideas and information. In furthering its aims the SAMT offers general material and
information through its website and publications therein.
The information provided on the SAMT website has been compiled for your convenience and made available for general personal use only.
SAMT makes no warranties implied or expressly, as to the accuracy or completeness of any information contained on the SAMT web site. The SAMT
directors, affiliates, officers, employees, agents, contractors, successors and assigns, will not accept any liability for any loss, damage or other injury resulting
from its use.
SAMT does not accept any liability for any investment decisions made on the basis of this information, nor any errors or omissions on the SAMT website.
This web site does not constitute financial advice and should not be taken as such. SAMT urges you to obtain professional advice before proceeding with
any investment.
The material may include views and statements of third parties, which do not necessarily reflect the views of the SAMT. Information on this website is
maintained by the people and organization to which it relates. The SAMT believes that the material contained on this website is based on the information
from sources that are considered reliable. Although all care has been taken to ensure the material contained on this website is based on sources considered
reliable we take no responsibility for the relevance and accuracy of this information.
Before relying or acting on the material, users should independently verify its accuracy, currency, completeness and relevance for their purposes. Before
making any financial decision it is recommended that you seek appropriate professional advice. The SAMT website may contain links to other websites, these
are inserted merely as a convenience and the presence of these links does not constitute an endorsement of the material at those sites, or any associated
organizations, products or services.

Journal eNewsletter: http://www.technicalanalyst.co.uk/eNewsletter/index.htm

Media Awards: http://www.technicalanalyst.co.uk/conferences/Awards13.htm
Sponsor Training: http://www.technicalanalyst.co.uk/training/index.htm
Books: http://www.technicalanalyst.co.uk/books/index.htm

The Swiss Technical Analysis Journal • Summer 2013 • 41


SAMT
Education
2-Day Immersion Course
for the CFTe Level II Exam
- Zürich
When: Saturday, 07 September & of this internationally recognised professional
Sunday, 08 September 2013
Where: Zürich
Hours: 9:00 until 18:00 each day TSAA-SF is an IFTA Member Society.
15 hours of Immersion Training
Class Size: 5 minimum; 10 maximum
Cost: SAMT Members: CHF 1150 Technical Analysis Applied
Non Members: CHF 1350
Early Bird Cost: SAMT: CHF 1050 involving actual experience.
Non Members: CHF 1250
Registration Deadline: Friday, 16 August
Early Bird Deadline: Friday, 9 August
Contact: ronwilliamPR@gmail.com
The course will be presented in English.
n This immersion course is also designed to
prepare candidates for the upcoming CFTe
Levels I and II exams which culminate in
the award of an international professional
qualification in technical analysis. The exam tests
technical skills knowledge and understanding of
ethics and the markets.
n The course will be limited to 5-10 candidates
so that each person will receive the same
individual level of information and instruction.
n The CFTe Level II exam incorporates a number
of questions requiring essay-based analysis
and answers. The candidate will demonstrate a
depth of knowledge and experience in applying
various methods of technical analysis.
n The exam also contains a number of different
charts covering one specific market (often an
equity) to be analysed, as though for a fund
manager or trader.
Who Will Teach the Course?
n The course will be taught by Bruno Estier,
CFTe, MFTA; and Ron William, CMT, MSTA who
are members of the Geneva chapter of SAMT.
n Collectively, the instructors have 45 years of
experience, have technical analysis professional
designations, and use technical analysis in their
daily work (see profiles).
For updated details and to register, please click
on this link
http://events.constantcontact.com/register/event?llr=
a6yl96lab&oeidk=a07e7plfv0pa6fb70bf
42 • Summer 2013 • The Swiss Technical Analysis Journal
Technical Securities
Analysts Association -
San Francisco (TSAA-SF)
Webinars
Each month the TSAA-SF presents webinars
that are often free or require a prepayment of a
small fee. The webinars are offered as various
times during the day - some early in the morning
(Pacific Time), some at noon or in the evening.
Because of the time difference between San
Francisco and Switzerland (9 hours), SAMT
members could view some of the webinars
during CEST evening hours.
The next webinar is on Saturday, 13 April on
Integrating Signals from the Credit Market
into Equity Trading Strategies by Dave Klein,
partner and co-founder of Capital Context LLC.
This webinar will be from 10:00-11:30 AM PDT
(19:00-20:30 CEST). The fee for this webinar is
$US 10 (the member fee).
Click to see the schedule of webinars available.
TSAA-SF is the oldest society in the U.S.
devoted to the study and development of
technical analysis of stocks and commodities.
Course- Lugano
Professional use of technical analysis for
investment decisions and trading (Certified
Financial Technician® - CFTe)
Technical analysis, today recognised as a
complementary discipline and not necessarily an
alternative to fundamental analysis, is essential
for those who work in asset management and
trading, and also useful for client advisors and
financial trustees. In recent years, there has
also been a growing interest in the topic by
“non-experts”, people from different professions
united by the passion for the markets. To meet
these diverse needs, the course provides a
thorough overview of the technical and practical
skills for the purposes of reporting and trading.
The course will cover both the practical aspects
of the subject and coverage of the syllabus set
by the International Federation of Technical
Analysts (IFTA).
The participants will have lectures with practical
exercises, group work, simulations and support
from technical analysis software.
The course, organized by Centro Studi Bancari
in collaboration with SAMT (Swiss Association
of Market Technicians), is for people working in
private and retail banking advisory, asset and
portfolio management, trading, treasury, trading
rooms, trustee financial consultants in insurance
and finance, insurance brokers, financial
intermediaries and persons interested in the
subject who want preparation for the Certified
Financial Technician examination.
Educational material will be provided during the
course by Centro Studi Bancari
When: 19 November 2013 until $250 US translation fee applies to non-English
18 February 2014
Where: Centro Studi Bancari $100 US applies for non-IFTA proctored exam
di Vezia
Hours: 48 hours
Class Size: 5 min; 20 max
Cost:
ABT, SAMT,
SFOA Members: CHF 2.990
Non-Members: CHF 3.490
Registration
Deadline: Friday, 31 October 2013
The course will be presented in Italian.
Click for a detailed program from the CSB.
IFTA Certified Financial
Technician (CFTe)
Program
The IFTA Certificate (Certified Financial
Technician) consists of CFTe I and CFTe II, which
together constitute a complete professional
program.
The two examinations culminate in the award
qualifi cation in Technical Analysis.
Examinations
The exams test not only technical skills, but also
international market knowledge.
CFTe I
This multiple-choice exam covers a wide range
of technical knowledge and understanding of
the principals of Technical Analysis, usually not
The CFTe I exam is offered in English, French,
Italian, German, Spanish, and Arabic, and
is available, year-round, at testing centers
throughout the world, from IFTA’s computer-
based testing provider, Pearson VUE.
CFTe II
This exam incorporates a number of questions
requiring an essay based analysis and answers.
For this, the candidate should demonstrate a
depth of knowledge and experience in applying
various methods of technical analysis. The exam
provides a number of current charts covering
one specifi c market (often an equity), to be
analysed, as though for a Fund Manager.
The CFTe is offered in English, French, Italian,
German, Spanish and Arabic bi-annually,
typically in April and October.
Curriculum
The program is designed for self-study. Local
societies may offer preparatory courses to
assist potential candidates. Syllabus and Study
Guides are available on the IFTA website.
To Register
Please visit the website for registration details.
Cost
IFTA Member Colleagues
CFTe I $500 US
CFTe II $800* US
Non-Members
CFTe I $700 US
CFTe II $1,000* US
*Additional Fees (CFTe II only):
exams
locations

SAMT
Partner
Societies
International Federation of
Technical Analysts (IFTA)
IFTA is a non-profit federation of 26
individual country societies who individually
and jointly dedicate themselves to
n Research, education, camaraderie and
dissemination of technical analysis
of world markets. The IFTA societies
support sharing technical analytical
methodology that at its highest level is a
valid, and often-indispensable element
in the formulation of a reasonable
basis for investment decisions.
n Promotion of the highest standards
of professional conduct, international
cooperation and scholarship between
all its Member and Developing Societies
within all arenas of technical analysis.
n Providing centralized international
exchange for information and data of
various financial centers while respecting
individual country and Society business
practices, legal structures and customs.
n Encouraging the standardization of
education and testing of its constituent
members in technical analysis, making
sure that each individual country’s
security analyst licensing, legal and
language /communication priorities
continue to be individually accepted.
n Fostering the establishment of individual
societies of technical analysts without
bias in regard to race, creed or religion.
It supports the need for maintaining a
free and open worldwide markets under
normal, and in particular crisis periods.
As a growing bridge of communication
worldwide, IFTA remains open to methods
of technical analysis, while encouraging the
consideration and support of membership
for both developing and established
societies.
www.ifta.org
The Swiss Technical Analysis Journal • Summer 2013 • 43
Centro di Studi Bancari
Founded by the Ticino’s Banking
Association in 1990, Centro di Studi
Bancari (CSB) is an institution that
promotes and provides education,
training and continuous update for
banking, fiduciary, insurance and legal-
financial professionals in the financial
markets. CSB provides courses,
training courses for various certifications
and hosts conferences. The training
programs are recognized at local,
national and international levels, as
well as by many private associations,
such as SwissBanking. CSB can
also organise tailor-made training,
leveraging on its inter-disciplinary
competences in the field of banking,
finance, compliance, management and
taxation.
www.csbancari.ch
Groupement Suisse
des Conseils en
Gestion Independats
(GSCGI)
CSCGI is a group
of economic interests formed by
specialized independent financial
intermediaries who are confirmed
professionals in the financial services
industry. The group is open to contacts
with any person interested in the
business of wealth management
seeking to promote dialogue with the
banking partners and authorities at all
levels. Their goals are to:
• Promote contacts between
professionals motivated by the
same desire for independence,
wishing to maintain and develop
relationships with counterparts.
• Find common ground for
exchanging experiences and ideas,
a field where diversity and novelty
are prevailing.
• The enrichment of the links that
can be forged on a friendly and
professional level within a well
defined and recognized framework
to favour professional consultation
and close dialogues.
www.gscgi.ch
Swiss Futures and Options
Association
The Swiss Futures and Options
Association (SFOA), previously the
Swiss Commodities, Futures and
Options Association, was founded
in 1979 as a non-profit professional
association for the purpose of promoting
derivative financial instruments,
particularly standard futures and options
contracts on financial instruments and
commodities, to the widest possible
audience, and to serve the interests
of its members. SFOA serves users of
commodity and financial derivatives, as
well as professionals, their institutions
and the exchanges.
www.sfoa.org
Swiss CFA Society
The Swiss CFA Society boasts over
2,400 members in Switzerland, against
barely 100 in 1996 at inception. It is
the largest CFA Institute society in
continental Europe. With more than
2,000 candidates taking the rigorous
Chartered Financial Analyst® (CFA®)
exam in Switzerland each year,
the society’s impact on the Swiss
investment community is self-evident.
It was the first society of CFA
charterholders in the EMEA region
to be directly affiliated with the
prestigious CFA Institute, which
includes more than 110,000 members
in 139 countries.
The vision of the Swiss CFA Society is
to be a leader in fostering the highest
level of knowledge, professionalism,
and integrity in the investment
business.
www.cfasociety.org/switzerland
The Swiss Association of Market Technicians

GenÈvE • Lugano • ZÜrich

44 • Summer 2013 • The Swiss Technical Analysis Journal