AbleTrend: Identifying and Analyzing Market Trends for Trading Success
By John Wang and Grace Wang
John Wiley & Sons, Inc.
$60; 268 pages
AbleTrend is the moniker for the Wangs’ trend trading system software marketed by their firm, Ablesys Corporation. The book is dedicated to the tens of thousands of AbleTrend users across 60 countries who have been using the software since its release in 1995. The authors firmly believe that every trader – AbleTrend user or not – should understand how to trade by understanding the key fundamental concepts and principles used to develop their software. Therefore, they reveal how the software was developed, the testing that was done and the basic indicators that it contains. As expected, they do not reveal the proprietary formulas. The key to profitable trading, according to the authors, is to understand and determine the trend and then trade it – fundamentals are not useful for traders.
John Wang has a Ph.D. in chemistry and a master’s degree in quantitative chemistry. He focused his research efforts on the seemingly chaotic financial markets because he believed natural laws are behind everything that we observe and that these laws can be applied to stock market trends. His goal was to discover the hidden structures of life’s apparently “random” events and apply those findings to develop an indicator that would work in bull and bear markets under all trading conditions. From 1989 through 1994, he tested the validity of 500 market indicators and created another 100 indicators. Through this testing he discovered how the market functions and developed specific formulas using a handful of indicators. After testing his formulas, based on non-linear regression equations, in all timeframes and with all types of investment vehicles, he found the breakthrough he was looking for, and the approach showed consistent replicable results to make profits. He ended up with a trend identification system featuring a method to identify the beginning and end points of a trend and the key resistance and support levels to use for placement of dynamic stops to protect principal. His indicators update in real-time with every incoming tick to a chart.
The software pinpoints specific entry, exit, and stop signals on any investment vehicle for any timeframe. Its universal application indicates its robustness. Individuals who trade futures, forex, commodities, stocks, bond and ETFs, and whether they use day trading, swing trading or position trading will find the software equally applicable. Charting in minutes, hours, days, or weeks allows traders to benefit from the identification of the beginning and ending of trends identified by the software. The software places large blue and red dots on each chart to identify the buy and sell points, as well as a series of tiny blue and red horizontal dots to identify the protective stop points. Also, the bars on the chart are colored blue, green and red to identify the trend. All in all, the signals are easy to follow, as I had access to the real-time software for a few weeks on a trial basis and found it easy to install on TradeStation and very easy to understand and use. The software is an add-on module to a number of other trading platforms.
AbleTrend software contains six trend related indicators including MACD, ADX, Stoller Average Range Channel Bands and three moving averages – 10-period simple moving average, 10 period-exponential moving average and 10-period weighted moving average. The specific AbleTrend indicators are labeled Trend 1, Trend 2, Trend 3 and TrendSig.
The size of the book is larger than the standard book, allowing the one-half page chart examples to be easily readable. The authors chose to use standard bar charts instead of the candlesticks used by many traders. Through the book, numerous charts were used to explain all the key points.
Appendix A contains 17 pages of interviews with ten AbleTrend users who discuss their trading approaches, experiences, and viewpoints on using the software. The bibliography lists thirteen books, most of which were published prior to 2000. Readers can also access an 80-minute video of one of the book’s trading methods by accessing the website provided in the book.
The key concepts used in AbleTrend are clearly explained in a straight-forward manner with visual examples that bring home the key concepts. The book definitely will enhance understanding of the software for existing users and provide readers with an approach that they can work with to develop their own trend trading system. The book was unusual in that it focused on the AbleTrend software, which has a limited universe of users, but it also provided readers with the key concepts for successful trading based on a scientific approach to determining a viable trading system that has not changed its formulas since inception.
Leslie N. Masonson is the author of “Buy DON’T Hold” and “All About Market Timing.” Reach him at email@example.com.