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Analyzing And Forecasting Futures Prices

Overview

To many traders, the idea that prices can be accurately forecast is a kind of heresy. But the fact is that there are now concrete analytical methods that can be used to forecast trends and turning points in futures prices--despite the difficulty of forecasting day-to-day changes. Analyzing and Forecasting Futures Prices is an advanced and highly practical guide to the latest methods of analyzing and predicting futures prices and applying them to hedging and speculation. Like no other guide, it offers practical ...
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Overview

To many traders, the idea that prices can be accurately forecast is a kind of heresy. But the fact is that there are now concrete analytical methods that can be used to forecast trends and turning points in futures prices--despite the difficulty of forecasting day-to-day changes. Analyzing and Forecasting Futures Prices is an advanced and highly practical guide to the latest methods of analyzing and predicting futures prices and applying them to hedging and speculation. Like no other guide, it offers practical techniques you can use now even with minimal expertise in mathematics. You'll find clear, detailed explanations of several field-proven but little understood methods of forecasting futures prices--including spectral analysis, array analysis, and time series analysis. And step-by-step, you'll see how commodity and financial prices can be analyzed accurately. How cycles in the series can create the patterns technical analysts look for. And how to make accurate price forecasts. Written by a noted authority on cyclical market behavior who specializes in the mathematical analysis of futures prices, Analyzing and Forecasting Futures Prices gives you the tools you need to use your spreadsheet program to gain insights into cycles in time series. Use different methods in a combined program. Even measure the performance of any forecasting method in a formal, statistical way. Plus, the techniques you'll find in Analyzing and Forecasting Futures Prices can also be used for forecasting individual stock prices and interest rates. For any trader or speculator in the risk-filled futures market, this may be the one reference that won't just sit on your shelf.
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Editorial Reviews

Booknews
Herbst (business administration, U. of Texas) reveals techniques by which the speculator in the futures market can predict prices. The trick is to find evidence of cycles in price series data, gauging the significance and estimating the parameters of those cycles, then combining them into a future curve. The calculations can be done with a spreadsheet on a personal computer. Annotation c. Book News, Inc., Portland, OR (booknews.com)
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Product Details

  • ISBN-13: 9780595142996
  • Publisher: AuthorHouse
  • Publication date: 12/1/2000
  • Pages: 260
  • Product dimensions: 8.25 (w) x 11.00 (h) x 0.55 (d)

Table of Contents

Ch. 1 Introduction 1
Futures Markets Today 2
What Forecasting Can and Cannot Do 4
Cycle-Based Forecasting Methods 4
Supply, Demand, and Price Cycles 6
Conclusion 8
Ch. 2 Market Efficiency and Price Behavior 11
Random Walk 11
Market Efficiency 12
Forms of Market Efficiency 13
Empirical Studies of Market Efficiency 14
Serial Correlation Tests 15
Filter Studies 16
Recent Evidence 18
Conclusion 19
Ch. 3 Speculation, Risk Bearing, and Money Management 21
Is Speculation Necessary? 22
Commodity vs. Stock Speculation 23
Leverage in Commodities Trading 23
The Role of Margin 24
Trading Costs 25
Who Should (and Should Not) Trade? 25
Choosing the Game 27
Straight Long or Short Positions 27
Spreads and Straddles 27
Risk Considerations 31
Entering and Lifting the Spread 32
Spreading for the Wrong Reasons 33
Money Management--Playing to Win! 34
Utility and Risk Aversion 35
Calculating Personal Utility 37
Pyramiding 41
Using Stop Orders 43
Limit Moves and Lock-In 44
Cutting Losses, Letting Profits Run 45
Portfolio Theory and Diversification 46
Risk of Ruin 49
Ch. 4 Fundamental and Technical Analysis 53
Fundamental Analysis 54
Demand 54
Supply 55
Price Determination 56
Market Equilibrium 57
Practical Considerations 59
Case Study: The Sugar Market 60
Technical Analysis 61
Traditional Technical Patterns 62
Head-and-Shoulders 62
Double Tops and Bottoms 63
Trends and Channels 65
Triangles and Wedges 66
Island Reversals 69
Other Patterns 70
Point-and-Figure Charting 72
Cycles and Technical Patterns 76
Conclusion 79
Ch. 5 Time Series Analysis and Forecasting 81
Forecasting Methods 82
Spectral Analysis 83
The Box-Jenkins Methodology 87
Case Study: Spot Gold 92
Appendix 5-1 95
Spectral (Periodogram) Analysis of DEC90 T-Bond Futures Settlement Prices
Appendix 5-2 103
Illustration of Test of Significance for T-Bond Cycle of 37.14 Days
Ch. 6 Visual and Manual Methods for Finding Cycles 105
Trend Removal 109
Conclusion 110
Ch. 7 Finding Cycles in Data with a Computer: Spectral Analysis 113
The Math behind Spectral Analysis 115
The Fast Fourier Transform (FFT) 118
Falling through the Gaps 119
Life without FFT 120
Application of Spectral Analysis 121
Summary 127
Ch. 8 Judging Whether a Cycle Is Genuine: Array Analysis 129
Definition of Genuineness 129
Array Analysis 130
Example: A Pure Cycle 130
Conclusion 144
Ch. 9 Moving Averages, Filtering, and Turning Points 147
Simple Moving Average 148
Exponential Moving Average 150
Moving Averages and Market Turns 150
Ch. 10 Forecasting with Cycle Combinations 155
Successive Removal vs. One-Pass Analysis 156
Example: Soybean Prices 157
Step 1: Spectral Analysis 158
Step 2: Successive Removal 158
Using a Backcast 163
Goodness of Fit 166
Ch. 11 "PDQ" or "Q and D"?: Maximum Entropy Spectral Analysis and Linear Prediction</</table>
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