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Trading With the Odds. C. Kase


Several years ago I had the pleasure of taking Cynthia Kase on a speaking (teaching) tour to Italy and throughout many mid-eastern countries, I could easily discern that her mind was always at work. She would not take the traditional, commonly used technical analysis studies for granted, but would investigate carefully where others had blazed a trail, using their observations as a jumping off place from which to begin truly unique research. An outside observer could see at the time that she had already mined the rough gems. I can tell it took work and dedication to polish these ideas into the methodology described in this book. The book is filled with unique observations. They are best summed up by Cynthia’s own comments on the present “state of the art” of the common routines published and used by technicians today She feels that today, even with the availability of powerful computers, we are still living too close to the past where most technical analysis was done by hand, or, at best, using spreadsheets on fairly crude computers.

Cynthia believes that we must make today’s powerful computers WORK and work hard. With the increase in versatility of today’s PCs, they are now capable of NEWER types of analysis if we tell them where to look. I could easily cite many new ideas illustrated in this book, but I will choose just one and, for brevity, I will greatly simplify the concept. A trader who trades in two time frames traditionally uses the longer (weekly) chart and its signals to confirm the shorter (daily) chart. The trader’s recurring dilemma is that he or she must wait for Friday’s close to get the weekly confirmation. The trader would like to get his/her signals earlier, but the system specified requires a weekly confirmation. Cynthia asks why a week must end on a specific day.

By using a “rolling” week for the last five trading days and their cumulative signal as the confirmation in building the system, both the daily chart and the weekly rolling chart can be evaluated EACH day This example demonstrates Cynthia’s dimensional expansion of a particular technique-breaking the traditional mold and looking for the trading edge. To sum up, at this time I feel Cynthia’s present work and the research evidenced in this book represents a new view of techniques. If computer users or experienced technicians are looking for a trading edge, then this book, with its new look at technical analysis, is one they will want to study and execute or make part of their trading plan(s). Ms. Kase has found the gems and polished them, and leaves the reader to put them in their setting.

My educational background was in engineering, while my trading background was as a corporate trader with a large oil company and then with a money center bank. Both these experiences have had a major impact on how I view the markets and how I trade. Accordingly, this book is about understanding the market from both an engineer’s and a trader’s points of view. It is about looking at the markets scientifically and accurately, without making the procedure for doing so too complex. The book also offers views of the market from new perspectives.

The reader will learn that simultaneously viewing the markets from multiple vantage points can provide profitable insights; that definitions and relationships based upon tradition are not necessarily the most accurate (15th-century mapmakers, for example, defined the world as flat); that an examination of statistically dependent and independent relationships can provide universal
views of the market that are not impeded by differing units of measure in time or volume; and that, by combining statistics with common sense, aggressive stops can be placed with confidence and without fears of missed opportunities.
Where many older indicators are based strictly on empirical observations, we now have the tools to derive indicators from the natural structure of the market itself.

Patterns that were difficult to observe with primitive tools now emerge for examination, and the reader is thereby led through complete and detailed step-by-step trades, utilizing his intellectual capacity and application of new
tools to better understand the market. Because I spent 10 years as a design and construction engineer and Naval Reserve engineering duty officer before I became a trader, I view the markets with an engineer’s eye. Like pure research scientists, engineers think about the world in abstract mathematical terms. Unlike them, however, engineers are paid to convert their abstract mathematical understanding into practical applications. This book adopts the engineer’s understanding of the market and applies practical and real-world terms, thus improving trading strategies and generating superior trading results.

Admittedly, this approach requires crunching lots of numbers quickly and accurately, an overwhelming obstacle in the past because the tools required for these calculations were extremely intimidating. The computational power of early computers was recognized, but getting at that power was tedious; computers were neither user-friendly nor affordable. Today, however, computerphobia is rapidly vanishing, and many people in the vast majority
of developed nations are as familiar with their computers as they are with their microwave ovens and telephone answering machines. We have powerful, affordable, and user-friendly computers. I say, let’s use them and make them work hard for us.

Once the reluctance to use new tools is overcome, all kinds of possibilities unfold. Markets can be explored in entirely new ways that can broaden our understanding by astronomical proportions. Those early mapmakers, for example, were exceedingly accurate in the things they could measure, but their perspective was limited to the use of the tools of their day. Consider the differences in their calculations and resultant maps if satellite imagery had been available to them.

One early technical indicator, developed in the late 1950s and early 1960s by Investment Educators, Inc., was the Stochastic, the most sophisticated tool extant. Though the Stochastic utilizes fairly rudimentary mathematical principles, calculating it by hand was still a tedious endeavor. During the ensuing 20 years, the programmable calculator, reverse polish notation (RPN) programming
language, and the first affordable personal computer (PC) were developed. As these tools became available, traders took advantage of this increase in available computational speed, using it to perform many tasks.

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