MARKET MASTER(TM) USER'S GUIDE Copyright(c) 1995 by R.M.C. FOR LATEST PRODUCT AND PRICE INFORMATION OR TO ORDER, CONTACT: R.M.C. P.O. Box 60842 Sunnyvale, CA 94088-0842 U.S.A. Phone: (408) 773-8715 FAX: (408) 733-9341 Internet email: forecast@forecast.com The information here may not be the most up-to-date, since we revise the information periodically. If you wish to receive the latest: (a) User Guide; and (b) Trading Tips with Check List; and (c) Tips on How to Spot, Avoid and even Profit from Wall Street Shenanigans; and (d) Functional Demo of our latest version of MarketMaster(tm); and (e) Literature and brochure about MarketMaster; then Send U.S.$39 ($29 credited towards software purchase) to the R.M.C. address given above. If you want a 2-month fully- functional Trial Version of MarketMaster, add U.S.$30, i.e. send a total of US$69 ($10 covers shipping and handling and $59 will be credited towards subsequent purchase). READ THIS USER GUIDE FIRST: Even though you are eager to start running Market Master right away, you will gain the most, if you take the next thirty minutes to carefully read through the user's guide. Refer to it again to refresh your memory or understanding if anything remains unclear. If after reading the User's Guide, you still have questions or encounter difficulty, please call the Market Master Technical Support Line, 408-773-8715, we'll either answer your questions right away or try to return your call collect at the best time you specify. Whether you use Market Master to predict the prices of stocks, futures or market indices, you can feel confident that Market Master will help make your trading much more profitable. REASON FOR MARKETMASTER: MarketMaster is designed with one objective: To help you siphon off profits from the target stocks, futures or indices (whether going long or short) as efficiently and effortlessly as possible. To do so, we have developed up to six(6) different powerful algorithms, each with two variations (Zoom On and Zoom Off) that create leading indicators to directly forecast both the direction and extent of future price movement before it happens. If you are experienced investor/trader, you know that advance forecasts of price movement direction and price targets are extremely difficult to develop, and as far as we are aware, no other software publisher has succeeded in producing a true price forecasting program that provides forecasts for both the direction and the magnitude of price movement ahead of time. We have decided to fill this glaring vacuum to satisfy an important need of investors and traders worldwide. The forecasted target prices are plotted next to the current price for easy visual determination of the direction and magnitude of future price movement. The results are displayed graphically for easy, at-a-glance decision-making. In addition, MarketMaster constantly checks and analyses its margins of error, which are inherent in any forecasting endeavor, and learns from its errors automatically. It then self-adjusts to limit error propagation and to give you better price forecasts. As usual, our emphasis here is power, accuracy, reliability and ease of use. DISCLAIMER: Your use of Market Master constitutes a representation that you are fully aware of the inherently uncertain nature of forecasting, and in particular, financial forecasting, as well as the risks inherent in buying and selling in the financial markets, and that the output of Market Master does not constitute "advice" or "recommendations", and that past performance is no guarantee of future results. Hardware & Software Requirements MarketMaster requires an IBM PC or compatible with 512K RAM, DOS 2.0 or later, and a minimum hard disk space of 720K (less than 1 Mb). While a VGA monitor would be best, any monitor will do. Note that for CGA monitors, the program picks the highest resolution which usually results in a two-color black and white display. While the use of a mouse is not required, it is much recommended. Be sure to load the mouse driver by following your mouse manufacturer's instructions before running MarketMaster. HOW TO INSTALL MARKET MASTER If you wish to use a mouse (recommended), be sure to install the mouse driver in accordance with your mouse manufacturer's instructions. Or you can install the mouse driver after Market- Master is installed, but before you run the program. If you want to use the mouse while in the MarketMaster program, but you forgot to install it first, simply exit the MarketMaster program, install the mouse driver (we recommend that you put the installation commands in the AUTOEXEC.BAT file in the root directory of your C: drive) and run MarketMaster again. Installation Method A: (Fast Installation, But Key Disk Required to Run): Create a directory on your hard disk using whatever directory name you like (e.g.,MM) and copy all the MarketMaster files from the floppy disk over to this newly created directory. Next, go to the newly created directory containing the files you just copied. Type "GO" and press the key to extract the compressed files that are now on your hard disk. That's all there is to the installation! However, you must keep the original disk (key disk) in the floppy drive to run. Installation Method B: (Machine Installation, Key Disk No Longer Required): Create a first-level (i.e. at the root of the drive) directory on your hard disk using whatever directory name you like (e.g., MM or MMASTER). For example, to create a directory called MM, use the command "MD MM". Next, go to the newly created directory. (E.g. use the command "CD MM" and press the key; you'll then be in the MM directory). Then go to the floppy drive where the MarketMaster floppy disk is by typing the letter of the floppy drive followed by a colon. (e.g. "A:" or "B:", followed by the key). Then type "INSTALL" and follow the instructions. If your floppy drive is X and you want to install it to hard disk Y, you'll type "INSTALL X: Y:". That's all there is to the installation. You should keep the original floppy disk (key disk) in a safe place because in the event you lost the machine install, you can still run the program if the original key disk is placed in one of the floppy drives (Drive A or Drive B). There is a batch file called "REMOVE.BAT" which allows you to remove the installation from one computer so that it can be installed on another. To move MarketMaster to a different computer, you must first remove the existing MarketMaster installation from the hard disk to the key disk. To remove the installation from hard disk Y to floppy disk X, you go to the floppy disk drive X and simply type the command "REMOVE Y: X:" and press key. You can then take the key disk and install MarketMaster from the key disk to any computer by following the installation steps as first described above. If you have upgraded to a higher or newer version of Market Master and wish to continue to use your data files, you should first install the newer version in a new directory. Then copy all your old data files (i.e. files with extension ".DBF") into this new directory. Data requirements For the one- or two-indicator Market Master, you only need the daily high, low, and close prices for each security, futures contract or market index you are tracking. The four- and six- indicator versions will also utilize, but do not require, volume or open interest data. You'll need a minimum of 18-23 days of data to begin a forecast. The maximum number of days of data the program will use is 62-67 days. The first 12-17 days of data are used as the initial foundation for Market Master 's analysis and are not displayed on the graphs that Market Master produces. To obtain a forecast, simply enter the data for the preceding 18-23 days from publications such as Investor's Business Daily or Wall Street Journal, or use the data files from a data bank source. Market Master assumes that the data are real historic observations and processes them with that assumption. Certainly if the numbers are false or inaccurate, the processing will be meaningless and computational failure may result. To avoid problems, always use real historic data. For best results, pick only actively traded issues for your analysis. Not only will the forecasts be more accurate, these are also the types of investment/trading vehicles that you'll want to use since they tend to offer the most opportunities for profit and the least slippage. Please note that volume information is not needed or used in the analysis by Indicator 1, 2, 5 or 6, but are used in analysis by Indicators 3 and 4. If you use the 1- or 2-indicator version, there is no harm in entering volume data if you wish to simply note it for the record or make your files ready for use with a more advanced version of Market Master at a later time. How to convert data to work with Market Master Market Master uses dBASE file format for its data files and records. Market Master will not accept real-time data, or data in DIF format. It can use, via a conversion step, data files that have been converted to a specific comma-delimited ASCII format, or CSI or MetaStock format. It also allows manual entry of data via the keyboard. If you wish to do data/file conversion, two optional file converters are available from us: 1) ASCII File Converter (C1) converts certain ASCII data files (such as Telechart 2000, AIQ and PRN text files) to work with Market Master's dBASE format. The ASCII data must be comma delimited and in the following format: YYMMDD for date, plus price data (High, Low, Close) and volume in any order. All fields in each record must be separated by a comma, although extraneous fields are okay, e.g. symbol field, open interest field, etc. Additionally, each record must reside on just one line (i.e. end with ). For example," 920118, 20, 17, 18.5, 3579 " is fine, so is "XYZ, 920118, 17, 20, 18.5, 3579 ". The ASCII file converter does not work for ASCII data separated by blank spaces. Typically you have five fields: Date, High, Low, Close, Volume, although more fields are permissible and the fields can be in any order. You will need to check with your data source whether data provided is in the above format. 2) Metastock/CSI Converter(C2) converts data files from CSI, Metastock, and Computrac data formats to dBASE format. INSTRUCTIONS ON OPERATING AND USING MARKETMASTER: After installing Market Master as described above, you should still be in the hard disk directory containing the installed MarketMaster. If not, you should simply go to the hard disk directory containing MarketMaster and type "GO" followed by pressing the key to begin running the program. You should temporarily insert the original disk (the "key disk") in the floppy drive when Market Master checks for its presence. Otherwise, the program will not run. You can remove the disk after the check. As stated earlier, if you had machine-installed MarketMaster, (i.e. using Method B of the Installation Procedure), no key disk is needed. Just remember that to run the program, you must first go to the directory containing Market Master. Type "GO" and press the key to begin. After the initial introductory screens, a menu will be displayed. From this menu, you can choose to: 1) View a demonstration file 2) Create a new file or retrieve an existing file, or 3) Exit the program To view a demonstration file Type "DEMO-" and the program will display the "DEMO-DBF" file containing actual sample data to show how the indicators forecasted. There are numerous additional demonstration files containing actual historical data. These files all end with a hyphen so that they are easily identifiable. These demonstration files are also working files whose data can be updated, edited, deleted, etc. To create or retrieve a file If you want to do your own analysis, enter the name of the file you wish to create or want to use. If that file has not been previously created, Market Master will automatically create it for you so that you can begin data entry for that file. Market Master automatically adds the file extension, ".DBF" (data base file), to all data files. For example, if you want to track the stock for IBM and name your data file for IBM stock "ibm", then just type in "ibm" as the file name then press the key when MarketMaster asks you what file name you want. If a file named "IBM.DBF" already exists in the MarketMaster directory, it will be automatically fetched and opened. If the file does not yet exist, it will be created. (Note: Those familiar with dBASE will note that the data files are in dBase file format). Once the proper data file is chosen (or created, if not found on disk), you are ready to use the functions. To view and pick from the list of all the existing files, type "?" and press the key. Press the first letter of the file name and/or use , and the up and down arrow keys to scroll through the list and select the file you want to open. Then press the key to open that file. You can pick "DEMO- " for a demonstration and the program will use the "DEMO-.DBF" file to demonstrate to you its capabilities. Additional DBF files that come with MarketMaster are also for your review. TO DO YOUR OWN ANALYSIS: You can analyze any and all stocks, futures, indices and mutual funds in any market by entering the file you want to use. If that file does not already exist, it will be automatically created for you so that you can then begin data entry for that file. To preserve uniqueness of data file names and avoid name confusion or duplication, we strongly recommend that you use the standard symbol or ticker symbol for the stock, index, future or mutual fund that you want to analyze. Of course, you are always free to use some other name, but remember that in doing so, you risk creating confusion or symbol name duplication especially if you track a very large number of symbols. The Command Menu Once your data file is chosen (or created, if not found on the disk), you will be presented with a command menu similar to those found in spread sheet programs such as Lotus 1-2-3. If you are familiar with Lotus 1-2-3, you will know how to move (i.e. step or cycle) from one command to the next by pressing the space bar or by using the arrow keys. As you move from command to command, a description of the function of the high-lighted command will be displayed on the last line of the screen. Use the space bar to move to the different commands and familiarize yourself with the functions of each command. Note that the DELETE and ZOOM commands are each a "toggle" in that it will alternate between the functions of DELETE and UNDELETE, and ZOOM ON and ZOOM OFF, respectively. You will see a line at the top of the screen with "Record #" (that tells you which record you are viewing. A new file will say 0 of 0.), "File:" (the name of the file you are viewing), and "Last Update" (today's date). The following is a listing of the commands, and their respective function and purpose: Command Function Purpose 1st Use first indicator to forecast Displays price forecast and graph using first indicator. 2nd Use second indicator to forecast. Displays price forecast and graph using second indicator. 3rd Use third indicator to forecast. Displays price forecast and graph using third indicator. 4th Use fourth indicator to forecast. Displays price forecast and graph using fourth indicator. 5th Use fifth indicator to forecast. Displays price forecast and graph using fifth indicator. 6th Use sixth indicator to forecast. Displays price forecast and graph using sixth indicator. I Instant Calculator Pop-Up Instantly pops up a calculator. Z Toggle ZOOM feature ON/OFF To toggle ON/OFF short- term view with higher sensitivity CrOvr Crossover analysis of 5-day and 11-day moving averages. Displays a graph of 5- and 11-day moving averages. View Browse file in table format. Line by line display of data in file with new commands. Add Append new record to file. Allows you to add a new record to the file. Edit Edit currently displayed record. Allows you to edit the record on the screen. Del Mark current record for future deletion. Marks the record on the screen for deletion. This is a toggle function. Strike once to delete. Strike again to undelete. Next Display next record. Displays the next record in the file. Prev. Display previous record. Displays the previous record in the file. Top Display first record in file. Displays the first record in the file. Bottom Display last record in file. Displays the last record in the file. File Select another database file. Returns you to the main menu and allows you to select another file. Shell Shell to DOS Temporarily drops you down to the DOS prompt without getting out of MarketMaster. So that you may be able to run some DOS commands. To get back to MarketMaster, you type "exit" and press . Quit Quit to DOS. Exits and quits Market Master and returns you to DOS. To select a command from the command menu 1. Press the space bar to select the command, then press the key, or 2. Use the arrow keys to select the command, then press the key, or 3. Press the first letter of the command (e.g. N for Next,) or the number of the indicators (e.g. 1 for Indicator#1). To display the desired record Use the following commands: "Next" to display the next record in the file. "Prev." to display the previous record in the file. "Top" to display the first record in the file. "Bottom" to display the last record in the file. To add new data Select the "ADD" command. The program is designed to take in Date, High, Low, Close and Volume data. The cursor will first be positioned in the DATE field. Enter the date as YYMMDD. The cursor will then move down to the next field. Enter the high, low, close and volume respectively. The 1- and 2-indicator Market Master do not use the volume data and it is not necessary to enter the volume data. You may wish to key in the volume data if you plan to upgrade soon to a 4-indicator or 6-indicator version which will use volume data. In lieu of volume data, you may also enter open interest. Whether you use volume or open interest, you should be consistent and not mix the two in the same data file. Once the last field has been keyed in, press the key and the system will process and save the information. To add data for another date, just select the "ADD" command again and proceed to enter more data. To edit existing data Select the "EDIT" command after you have displayed the record you wish to edit. The cursor will be positioned in the DATE field. Move between the fields using the arrow keys. Type over the data you want to edit/change. When you are finished with editing the data for a particular date, press the key to save the information. Note that editing may also be done while at the View Mode. To edit another set of data, position to the proper date before selecting the "EDIT" command again to repeat the above steps. To delete data Note: The DELETE command is a toggle in that it will alternate between the functions of DELETE and UNDELETE. Select the "DEL" command after you have displayed the record you wish to delete. The word "DELETED" will now replace "RECORD" on the left upper corner indicating that the record has been marked for future deletion. To undo the DELETE command (to UNDELETE), select the "DEL" command again. You can UNDELETE any record marked for future deletion at any time prior to viewing a forecast graph or exiting the file. Once you have used an indicator to forecast or have exited the file, all the records marked for future deletion are permanently deleted. Records marked for deletion are not used in the forecasts. To select another file Selecting the "FILE" command will return you to the main menu and allow you to select and open another file. The View / Browse mode The use of the View command immediately provides you with a line- by-line display of data records in table format (also known as the "Browse Mode"). The VIEW command is not active on files that have less than two records. Once you have entered two or more records, the VIEW command becomes active and you may enter any subsequent records in VIEW mode. For intra-day analysis, you need two intra- day records to activate the VIEW mode. In the case of intra-day analysis, the dates may be the same but the records will be maintained in the order they were originally entered. Therefore, for intra-day data, be sure to enter the records in the right chronological order. Use View mode to see the order better. The VIEW mode is preferred by many experienced users. Once you are in View or Browse mode, the Lotus-style menu will no longer be operative. Instead, use the new commands as described on the top of the screen to navigate or manipulate data. You may also press the F10 function key to see, and pick from, all available commands. You can use , keys to scroll up and down and the arrow keys to move from record to record, and from field to field. You might find the View mode more convenient for adding (i.e. Appending), updating (i.e. Editing) or deleting records, but this is largely a matter of personal preference. The following are some of the commands found in the VIEW mode: Some of the short-cut keys for the commands are listed at the top of the screen while in VIEW mode. For example ^U means pressing down the key and while keeping it down, press the U key. ^U = DELETE (While holding down the key, press the key). It is the same as the Delete/Undelete toggle in the aforementioned Lotus-style command menu. You can mark each line of record as Deleted or Undeleted using the Control-U key combination. Use the , , and arrow keys to move about and select the line of record you wish to delete. Then press ^U. The record will then be marked for future deletion. To UNDELETE, press ^U again. The records marked for future deletion will remain visible on the screen until a forecast is made using one of the indicators or until the file is closed. You can UNDELETE any of these marked records any time before you use an indicator to make a forecast or before you exit the file. Once you have selected an indicator to forecast or exited the file, the records marked for deletion are permanently removed and cannot be undeleted. F2 = EDIT Use , and the arrow keys to select the data you wish to edit. Press the key to mark the data and then type over the data you want to change. F3 = APPEND / ADD Press the key and a message will be displayed on the bottom of the screen: "Proceed to append record? N". If the answer is yes, press "Y". The cursor will be positioned at the top of the screen where a new line has been created for the new data entry. Type in the data for the record you wish to add and press the key when you are all finished. Otherwise, to add another record, press the key again. While in the View mode, you can use the and keys for scrolling up and down multiple lines as well as the arrows to move from record to record or field to field. To get out of the VIEW mode, you simply press or key. ENTER / ESC Press the or key to exit the View mode and return to the main data screen and the Lotus123-style Command menu. AUTOMATIC DATA ENTRY: As stated earlier, file format conversion utilities are available, which will convert data files written in ASCII, CompuTrac, CSI, Metastock formats to MarketMaster's dBase file format. How to interpret the Market Master forecast graphs The difference between the six indicators The indicators differ in their different methods of analysis and price forecasting and in their leading characteristics: Each indicator also provides a different perspective of the market. Viewed together, the battery of indicators provides a comprehensive overview of different impending market forces acting to bring about the predicted price change. By way of analogy, if one wishes to know what the interior of a car looks like, he gets a lot of information by looking through the front and rear windshields. However, if he is further able to look through each of the side windows, he will get the best assessment of the car's interior. However, since we are dealing with forecasts, which, unlike facts, are not yet certain, there will be instances when some of the forecasting indicators do not agree. To be most conservative, choose only those opportunities where most of the forecasting indicators agree and the forecasted price change is large. Then switch to the Zoom mode and obtain more sensitive forecasts for even shorter-term. If the Zoom forecasts also mostly agree, then the reliability of the forecasts is further increased. Interpreting the graphs Normally, a clear and decisive uptrend or downtrend in price is the easiest to deal with. In fact you can make money in such a situation even with very lagging indicators. The toughest markets for the trader/investor and for most financial software are the sideways markets, that do not show a trend. Most users already have one or more trend-following systems but nothing for the sideways markets. We have therefore incorporated powerful analytical procedures to enable you to not only deal with sideways markets, but profit handsomely from them. As a result, MarketMaster is particularly powerful and profitable for the otherwise frustrating and costly sideways or meandering markets. Of course, you should continue to use whatever software or system that benefits you. With MarketMaster, you are in a position to profit from narrow trading ranges and situations that would be considered extremely difficult and costly to trade by the professionals. Remember that 70% of the time the market is non- trending. This would mean that you will likely improve your performance during that 70% sideways "drought" period, turning what is financial famine for others into a potential feast for you. The analysis and forecast graphs generated by Market Master will use data from the last 62 days. The first 12 days of data serve as the initial foundation for analysis and are not displayed ( nor are the daily highs, lows and volume, even though they are used in the analysis). Thus up to 50 days of closing prices and analysis are displayed. The latest and most recent data and forecast are displayed on the rightmost end of the graph. For each analysis and forecast, a graph display with 3 lines will be presented: * The blue (or dotted) line is the closing price line showing the actual closing prices for up to the last 50 days. In the Zoom mode, it is up to the last 23 days. * The yellow (or solid) line is the forecasting indicator line which forecasts the probable future price direction and target. * The green (or dashed) confirming indicator line confirms what has been forecasted and serves to justify a planned position—it will help keep you from entering or exiting the market prematurely. The confirming indicator confirms whether the actual price has topped or bottomed. This is useful because of the substantial lead time that forecasts can sometimes precede a price turning point. It is not unusual for a market to be bearish as indicated by the forecasting indicator line, and yet the prices do not decline right away, and vice versa. After knowing the price will be bullish or bearish from the forecasting indicators, whether to open, close or keep a position can then be determined by referencing the confirming indicator. A bullish position is well justified if the forecasting indicator is bullish (i.e. substantially above the closing price) and the closing price remains above (and NOT equal to) the confirming indicator. The case for a bearish position is well justified so long as the forecasting indicator is bearish (i.e. substantially below the closing price) and the closing price remains below (and NOT equal to) the confirming indicator. By comparing the forecasting indicator line with the closing price line and the confirming indicator line, you can immediately determine the near-term price outlook. In general, if the forecasting indicator line is above the closing price line, and the closing price line is above the confirming indicator line, a bullish position is justified. This is so because the forecasting indicator is telling you that the future price/direction will be above the current price and this is further confirmed by the closing price line being above the confirming indicator line. Conversely if the forecasting indicator is below the closing price line, and the closing price line drops below the confirming line, a bearish position is justified. Moreover, the degree of bullishness or bearishness can be gauged by the amount that the forecasting indicator line is above or below the closing price line. A deteriorating bullish situation (i.e. one less bullish) is indicated where the forecasting indicator line, although above the closing price line, is rapidly dropping or moving towards said closing price line. Conversely, a decreasingly bearish situation (i.e. less bearish) is one where the forecasting indicator line, although below the closing price line, is moving up relative to said closing line and approaching it from below. Theoretical buy signals are triggered where the forecasting indicator line is above the closing price line which in turn crossed above the confirming indicator line. Theoretical sell signals are triggered where the forecasting indicator line is below the closing price line which in turn crossed below the confirming indicator line. In practice, you would want to pay attention to the magnitude of future price movement by comparing the target price (as indicated by the forecasting indicator line) with the current price (as indicated by the closing price line) to see if it is of sufficient magnitude to justify a trade, after taking into consideration commission, slippage, frequency of trading and other personal preferences, etc. * For a bullish forecast, buy when the closing price is above the confirming indicator and the magnitude of upside movement, as shown by the forecasting indicator, is sufficiently large, i.e. sufficiently above the closing price. * For a bearish forecast, sell when the closing price is below the confirming indicator and a sufficiently large downward movement from the closing price, as shown by the forecasting indicator, is evident. You will note that in both instances, the closing price will be positioned in such a way that it is "sandwiched" between the forecasting indicator and the confirming indicator. The only distinction is that in the case of bullish forecast, the forecasting indicator is on top (i.e. above the other two lines) and in the case of bearish forecast, it is at bottom, (i.e. below the other two lines). The amount of lead in each forecast is highly data dependent. The nature of the underlying stock, future, index or mutual fund, does affect the amount of lead time. If you do not want to rely on confirming indicators (which tend to be somewhat late and conservative), it is advisable to adjust for the amount of lead time by referencing recent forecast history. For example, if for a certain stock, the buy signals from the forecasting indicator tend to come a day before the true price bottom, then you would want to take that into account in planning your entry or exit, particularly if you do not want to wait for the confirming indicator to confirm. Likewise, if the sell signal for this same stock tends to come 3 days ahead of the true top, you would want to consider waiting for about 3 days after a bearish forecast, or until the signal is confirmed by the confirming indicator, before selling or going short. Each stock, mutual fund, futures contract or security has its own peculiar lead time for the buy and sell signals and an examination of the graphic display given by Market Master will usually provide the clue as to how much time adjustment to make. Or you can wait for the confirmation from the confirming indicator. Please note that as situations warrant, Market Master rescales the forecasting and confirming indicator lines to show the correct relative strengths before predicting the next period. This enables more sensitive and accurate forecasts for the last day for better decision-making. For bullish or long positions, it is advisable to arrange the price targets or price changes in ascending order for planning purposes. It is important and desirable to open a position only at or near a price turning point. This is so because at a price turning point, your risk is least and your profit potential is maximized. For example, if the price of a stock is currently at a turning point and selling for $50 and the forecasts are as follows: Indicator #1 #2 #3 #4 #5 #6 Target $52 $51 $54 $53 $56 $55 You would rearrange the various targets in ascending order as follows: Indicator #2 #1 #4 #3 #6 #5 Target $51 $52 $53 $54 $55 $56 Your expectation then is that the price will first move to $51, then $52, then $53, and finally $56 under ideal conditions. However, since circumstances are rarely ideal, you may expect some corrections on the way up. Let us assume that subsequently the price moved to $53.25 and then drops, you will learn that the lowest 3 targets are met for the earlier turning point at $50. This will serve as a guide to utilize the lowest 3 targets as realistic short-term goals at the next price low (i.e. bullish price turning point), that way, you will not hold for unrealistic moves in the short-term. Strategies can be highly important in the success of your trading. This is an area that is outside the scope of Market Master, which deals only with price forecasting. Generally, it is highly advisable to trade in stocks and instruments that are optionable. There are, for example, about 1,000 stocks that have options. As an example of a bearish or short position, let us assume that the stock is trading at $100 and is at a price top (i.e. bearish price turning point) and the following forecasts are obtained: Indicator #1 #2 #3 #4 #5 #6 Target $96 $97 $94 $95 $92 $93 You would rearrange the various targets in descending order as follows: Indicator #2 #1 #4 #3 #6 #5 Target $97 $96 $95 $94 $93 $92 Assuming that you are satisfied that you are at or close to a price peak and want to go short, you may wish to free yourself from the risk of unexpected upside swings. You may, for example, choose to buy a short-term, at- or out-of-the-money call for each 100 shares that you go short at $100. Alternatively, you can buy a straddle with strike price of $100 and then go short 100 shares for each straddle, which is an even more bearish strategy. The advantage of such approaches are that you largely eliminate the anxiety that unexpected upside movement may bring. Additionally, the need to be very accurate and precise about the true price top is somewhat reduced. Let us assume that prices then drop to $94.5 before rebounding. From this experience, one may tentatively conclude that the lowest four magnitudes of price movements are realistically achievable in the short term when first obtained at a price top (i.e. bearish price turning point). This is helpful to know because in a bear market, increasing number of downside targets from a price peak will be quickly reached in the short-term and decreasing number of upside targets will be achieved from a price bottom. Such experience and observations help to assess the overall condition of the market (i.e. bullish or bearish). If you find upside targets are hard to meet and downside targets are readily met, it is an indication that short positions are to be favored, and vice versa. Typically, you would adopt a strategy wherein you would be prepared to close out if a certain number (based on prior experience) of nearest price targets (originally forecasted from a price turning point) are met. Even if the forecasts indicate a very substantial additional movement remaining, it would be prudent to take some profits. Additional Interpretation Tips Looking to the left of the last day on the graph, one sees the yellow (forecasting) line zig-zagging across the screen. It is important to note that the zigzags are scaled to provide an indication of relative strengths internal to the underlying security. It is therefore meaningful and feasible to apply the concepts of trendlines to the analysis of the movement patterns of the yellow (forecasting) line. First, if the yellow line zigzags upwards, it indicates that the prices are turning more bullish (or less bearish). Additionally, we can see if the underlying security is turning bullish by observing if the yellow line is trending upwards by making higher lows (increasingly bullish or decreasingly bearish) and higher highs. If the yellow line is trending downwards (by making lower highs and lower lows), then it is an early warning that the prices are turning more bearish (or less bullish). Next, we see if the yellow lines tend to peak out at certain prices which would be important potential resistance levels. Where the yellow line tends to bottom out would be important potential support levels. Whenever prices reaches these levels, a reversal is likely to occur. Next, we study the yellow line relative to the price. If on a particular day, prices remain essentially unchanged and yet the yellow line rises (bullish) or falls (bearish) sharply, it is often a warning of what is to come. Likewise, if prices drops slightly or even rises slightly, and yet the yellow line drops a lot more, an early hint of imminent and further bearish movement is indicated. Conversely, a slight price drop or a slight price rise which results in a sharp rise in yellow line, is often a hint of imminent upward price move or further upward price move. It is also important to stay out of situations that are not clear cut or not rewarding. In trading, there should be no egotism, only pragmatism. Interpretation of Crossover Analysis In addition to the 6 forecasting indicators, a cross-over analysis of the 5-day and the 11-day moving averages is also available. At the Lotus123-style Menu, press 'C' or choose 'CrOvr' command to activate this analysis. In this analysis, the yellow (solid) line would represent the 5-day moving average, while the green (dashed) line would represent the 11-day moving average. The interpretation is classic; i.e., when the faster indicator (i.e. the 5-day moving average) is above the slower indicator (i.e. the 11-day moving average), it is bullish. Conversely when the faster indicator (i.e. the 5-day moving average) is below the slower indicator (i.e. the 11-day moving average), it is bearish. Printing the graph on the screen If you wish to print the graph displayed on the screen, you should turn on you printer, make sure it has paper and then select your printer type. In a few seconds to a minute or more (depending on your printer), the graph will be transferred from your screen to your printer. After the printer is finished with printing, the program presents you with the Lotus123-style Menu for further instructions. Currently, for hard copy graphic output, we support all printers that are compatible with Epson-FX, HP-Laserjet, Epson-MX or IBM Proprinter. Be sure to set your printer to the proper emulation mode if it is other than the above named. MORE TRADING TIPS On Entry and Exit It is foolhardy to be long or short 100% through a single trade. To try to pinpoint the exact top or bottom is not as rewarding as gradually easing in and out of price turning points. For a given stock, it is better to initially commit only a fraction of the total allocated funds at what you judge to be the bottom (to go long) or top (to go short), and gradually increase your commitment as further evidence of the correctness of your judgment comes in. Likewise, it is advisable to take profits by liquidating a portion of your total position at potential price turning points. This type of averaging around price turning points will reduce the impact of error and make you less emotional. Note that this is very different from and far superior to the mechanical approach that advocates the commitment or liquidation of a fixed percentage regardless of whether the price is or is not at a turning point. Those who use the Martingale method will readily recognize that MarketMaster will dramatically improve their performance, since they will be concentrating their trades near turning points, rather than spreading them evenly over the entire price spectrum. On Profiting from Price Declines You are not a "compleat" investor/trader unless and until you can handle price declines as easily as you can deal with price advances. As mentioned earlier, options may dramatically reduce your risk of going short. One other major risk in shorting a stock is the chance that a stock may become a takeover candidate and rise sharply. Again, proper options strategy will be fully adequate to protect you from such unusual events that do not occur often but can be devastating to an unprotected short position. In general, closed-end funds of high liquidity are reasonably safe to short even without options protection, provided you are in a bear market. This is due to the fact (not guarantee) that there is rarely ever an effort to takeover the shares of a closed-end mutual fund. In a bear market, shorting closed-end mutual funds may be relatively safe since the chance of a takeover or short- squeeze is greatly reduced. There is no time premium costs that options would entail. However, as in any short position, care and advance study are a must before placing your order to implement your strategy. Mutual Funds Since these don't have daily high, low and close prices, the best approach is to forecast the index itself, if the mutual fund is an indexed fund. For example, if your mutual fund consists of OTC stocks, then it should closely follow the OTC (NASDAQ) Index. Simply enter the high, low and close for the Index and use the NASDAQ volume. Likewise, if your mutual fund is indexed to the S&P 500 Index, you may then use the daily NYSE volume as the volume, and the daily high, low and close of the S&P 500 Index. Alternatively, you may use the high, low and close of the Dow Jones Industrial Average. In other words, always look for the Index that closely follow the fund. For example, use transportation index for transportation funds and utility index for utility funds. A note on volume data: It is not necessary to be exact on volume data; you can use the first three significant digits, which will be accurate enough. The accuracy of price data is more important, and should be exact, if possible. Sector funds may require special treatment. For example, to track a gold fund, first determine what is the major stock or stocks comprising that fund. A simplified approach is then to forecast the predominant stock within said sector fund. A more refined approach is to synthesize an index based on the top stocks comprising that fund, e.g., by taking the mean or average of their daily highs, lows, closes and volumes. A still more refined approach is to further weight the component stocks according to their share of the total fund value. The ultimate position is to weight every stock comprising the fund to generate the synthetic index, in arriving at the synthetic high, low, close, and volume. However, don't get carried away with this, as a point of diminishing returns is quickly reached. Of course, you can always set the High and Low to equal to the Close and then do the forecasts. Futures You can use Market Master to trade all futures including index futures, S&P 500, all agricultural futures (corn, pork belly, wheat, etc.), currency futures (Yen, Deutsch Mark, Swiss Franc, British Pound), energy futures (crude oil, gasoline), precious metals (gold silver, tin), interest rate futures (treasury bonds, GNMA), and overseas futures such as rubber, freight, etc.. Because volume data are not reported at the end of each day for futures contracts, one must enter an approximate or estimated volume, unless you decide not to use volume data at all. You cannot just leave the volume figure as "0" when you have volume figures for previous records. Any reasonable volume figure will do (e.g., just enter previous day's volume as today's, and a day or two later, when the actual figures come out, edit the old numbers to reflect the true figures now available). If you leave the last day's volume as "0" when the preceding figures are not "0", the forecasts will become inaccurate for Indicators 3 through 4. You must either provide volume data for all the records in a file or for none of the records, unless you use Indicators 1, 2, 5 and 6 only, in which case volume data are not used and therefore irrelevant. Alternatively, in lieu of volume, you may enter open interest data as if it were volume. Just be consistent, and don't mix up volume with open interest, as the two are quite different. If you use volume data, then continue to use volume data. Likewise, if you use open interest instead, then continue to use open interest data. Because futures contracts expire, you should follow the different expiration months simultaneously so that if the nearest expiration expires, you have the next nearest to follow. It is advisable to follow at least two of the nearest expiration futures (i.e., two that are about to expire) so that if one expires, pick the next nearest one and add the second nearest to expiration contract (so that you again have 2 contracts to follow). Stock Options If you wish to use Market Master for stock options, we suggest that you forecast the underlying stocks instead of the options themselves. If you wish to trade stock index futures, we suggest that you analyze the underlying index itself. For example, for the S&P 500 futures, it would be much better and more accurate to forecast the S&P 500 cash index by using the daily High, Low and Close of the cash index itself and by using the total New York Stock Exchange volume as a proxy for the volume of the 500 S&P stocks. Likewise, for OEX options trading or stock index futures options trading, the underlying cash index should be analyzed instead. Not only will the results be more accurate, the data is readily available and not delayed. Moreover, you avoid the problem associated with expirations as would exist if you were to analyze the futures or options directly. In the case of non-market-index futures such as agricultural commodities, you may have no choice but to use the data relating to the particular commodities. Besides stocks and futures contracts, areas where Market Master can be useful include the forecasting of the Dow Jones Industrial Average, a market index that has a High, Low, Close for each day. As for volume data, simply use the New York Stock Exchange Volume in lieu of the volume for the 30 industrials. This is preferable to no volume at all. You can use the signals for the broad market averages to switch between stock and money market funds without commission if you switch between no-load mutual funds. TECHNICAL SUPPORT If you have a technical question about or need technical assistance with Market Master, please call 408-773-8715. If your call cannot be answered right away, we'll try to return your call, collect, at the preferred time you indicate. If you desire to upgrade to a newer or more advanced version of Market Master, please call 408-773-8715 for more instructions. RMC, P.O. Box 60842, Sunnyvale, CA 94088-0842, USA Copyright Information Market Master is copyrighted. Copyright ©1995 by RMC. You may not decompile, disassemble or reverse engineer any version of Market Master, nor modify Market Master itself without prior written consent from RMC, or act in any way that impairs the proprietary and intellectual property rights and interests of RMC and the like interests of the publisher or distributors of Market Master , and their successors and assigns. Your use or continued use of MarketMaster constitutes your agreement to the terms and conditions herein. RMC retains the title and ownership of the Market Master programs and support files but grants you a lease and license for their use, provided that you are the original owner of the program and abide by the terms herein. Your license to use a particular version does not extend to later or other series or versions, nor their accessories, unless you have paid the applicable fee(s) or upgrade fee(s) to the Publisher R.M.C. for said series or versions for which such fees are in existence or applicable. Except for the aforementioned lease and license, the author, manufacturer and publisher retain all rights to the Market Master program and support files and can make changes to them, or withdraw them from public use altogether, at their sole discretion and without notice. In the event you have a special version for which permission to distribute or copy is expressly granted by the introductory screen of the program (as happens in a demo version), you may indeed distribute or copy it, provided: (a) You distribute it with all original programs and support files and documentation; and (b) You do not charge for more than a nominal handling fee of U.S.$10.00 while distributing the special version; and (c) You do not distribute the special version beyond the date authorized. In the case of a freely distributable version, the release of a later version number is automatic notice that all prior versions are superseded, no longer to be circulated or distributed, and are therefore withdrawn from public use. Therefore, as of March 1, 1995, all prior freely distributable versions of MarketMaster, with version number of 4.xx or lower may no longer be used or circulated. All versions and series of MarketMaster bearing version numbers of 4.xx or less are superseded by the current version number 5.00 Versions of Market Master available Market Master programs are available in the following packages: *Market Masterä (E2), which provides end-of-day analyses with Forecasting Indicators 1 through 2; *Market Masterä (E4), which provides end-of-day analyses with Forecasting Indicators 1 through 4; *Market Masterä (E6), which provides end-of-day analyses with Forecasting Indicators 1 through 6; *Market Masterä (I1), which provides BOTH end-of-day AND intra-day analyses with Forecasting Indicator 1; *Market Masterä (I2), which provides BOTH end-of-day AND intra-day analyses with Forecasting Indicators 1 through 2; *Market Masterä (I4), which provides BOTH end-of-day AND intra-day analyses with Forecasting Indicators 1 through 4; *Market Masterä (I6), which provides BOTH end-of-day AND intra-day analyses with Forecasting Indicators 1 through 6; Also available is a fully functional Trial Version which is identical to the 6-indicator Market Master (I6). There are numerous demonstration files in every disc, allowing you to see how the indicators performed using actual historical data. We have ongoing R&D efforts to ensure that as financial markets change, our software will also be refined to better deal with them. GET COMMERCIAL VERSION: Our regular commercial versions E1 through I6 above provide you with up to six(6) different analyses or price forecasters and unlimited usage in terms of time and number of data files or symbols you can analyze. If you want to continue to use MarketMaster after the trial period, order the commercial version well before the expiration of the trial version to get credit for the purchase price of the trial version and so that you can enjoy and profit from the amazingly accurate price forecasts without any interruption. To order your commercial version, or upgrade MarketMaster, please use the accompanying Order Form. We accept check, money order or cashier's check. Please allow two to four weeks for personal checks to clear. Copyright (c) 1995 by R.M.C. All rights reserved worldwide. Ver.5.01 Acknowledgment: IBM, Investor's Business Daily, Wall Street Journal, dBase, MetaStock, CSI, S&P 500 and Lotus 1-2-3, Future Link, Future Source, AIQ, PRN, Computrac, and Warner are trademarks of their respective owners. MARKETMASTER(TM) ORDER FORM: (SPECIAL INTRODUCTORY HALF-PRICES below subject to increase w/o notice.) (Regular prices for MarketMaster are two(2) times the prices shown below.) 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