Trader Tom Bierovic Comments On His Successful
By Jim Wyckoff
(Note: I wrote this story a few years back, when I was a journalist with FWN.)
Tom Bierovic got a taste of technical analysis early. At the age of 13, he had a part-time job updating daily and weekly bar charts for his father, who was a member of the Mid-American Commodity Exchange.
Bierovic has been trading for his own account since 1971. Through the years he has presented seminars on technical analysis and trading in 35 countries, and contributed the chapter on oscillators in Jack Schwager’s 1995 book: “Schwager on Futures: Technical Analysis”.
He is a featured speaker here this weekend as part of the 20th annual Telerate Seminars Technical Analysis Group (TAG 20) conference here. He shared with FWN some of his general ideas on trading, as well as one specific trading method.
“The most important requirements for a trader’s success is that he trades in a way that is consistent with his own personality and belief system,” said Bierovic. “’To thine own self be true,’ as Shakespeare said.” Bierovic said he has always needed “simplicity, structure and a clear vision of the path ahead” in order to trade successfully. “My trading method has to reflect those values.”
“I need to know why I’m getting into a trade, where I’ll get out if the market moves against me, and how I’ll exit with a profit if the market trends in my favor. I have to be careful not to over-complicate my trading method, not to make up new rules as I go along, and not to lose sight of my goals.”
Regarding entering a market, the risk and profit objective in a trade, Bierovic said one of his best indicators is called Momentum Retracement.
“In Momentum Retracement, I first determine the trend. I use exponential moving averages (EMA) of highs and lows with a faster EMA of closes. I confirm that trend indicator with the signal line of a sensitive MACD (Moving Average Convergence/Divergence). Second, I check to see if the trend has good momentum and consistent directional movement. I use an RSI (Relative Strength Index) to reviewuate the momentum and the DMI spread to reviewuate the market’s current ‘trendiness.” (The DMI spread is the difference between the + Directional Index and the – Directional Index of Welles Wilder’s Directional Movement Index.)
If Bierovic determines the market is in a good uptrend, he next looks for retracement. “At least three of these four conditions must be met: prices decline into a moving-average channel, the MACD line crosses below the signal line, the RSI declines below its midpoint, and the countertrend decline is at least a 38.2% but not more than a 61.8% retracement of the previous trend wave.”
After he identifies a retracement: “In an uptrend with RSI declining at yesterday’s close, I buy at a one-third retracement of the countertrend decline. In other words, one-third of the way back up. If RSI was rising at yesterday’s close, I buy at one-third of the way back up or at a return to yesterday’s high--whichever is lower.”
Once in the market and long, Bierovic then sets a protective stop at the low of the countertrend decline “or at one 10-day average true range below my entry point--whichever is lower.”
If the trade is going his way, “I trail a stop at the highest high since entry minus one tick more than the size of the previous corrective wave.”
To review, Bierovic looks for an impulse wave and a corrective wave. He buys if the market starts back up, and he sets a “reasonable” protective stop. Then, he trails a stop the highest high since entry minus one tick more than the number of ticks in the corrective wave.
Bierovic does not always continue to trail a stop until the market stops him out. “There’s a time to trail a loose stop and a time to trail a tight stop. On the day that the market reaches my profit target, I raise the trailing stop to the intraday low.”
On his profit target, Bierovic relies on a “measured-move objective. It’s a little complicated to explain, but here goes: After my entry into a long position, I look back on the chart and find the most recent pivot point low (a low with higher lows to its left and right on the chart) that would make the recent countertrend decline a 38.2% to a 68.1% retracement of the uptrend. Then I subtract that pivot-point low from the high of the uptrend and add the difference to the low of the countertrend decline. That’s the measure-move objective.”
Bierovic recently joined Omega Research, Inc. as product manager for technical and quantitative anlaysis education.
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