I daytrade the nq futures with stochastics (14,3) as my lead entry indicator. It works well when the market is rangebound but not so well when the market gets"overbought/oversold for an extended period. Is there any other indicator that gives clues regarding the duration time for this "over b/s" period? thanks to all for all the great advice on the site.
Daytrading with stochastics
- Thread starter larrybf
- Start date
You could switch to moving averages, once OB/OS conditions are in and the price keeps trending in either direction.
Stochastics ( like most oscillator systems ) is only of use in sideways markets.
Once a real trend has been established , you're better of using trendfollowing indicators, such as MA or Bollinger bands.
For shortterm, you could use an 8 / 13 period MA crossover system, but keep an eye on your stochastics. Use the slower MA as stop-loss level .
Also, an MACD system could be of some help, if you rely heavily on those kind of indicators.
If you want to trade only with with stochastics, use the same setting of periods, but a longer time frame.
A 14/3 slow Stoch may signal oversold readings on a 3minute chart, while it barely has moved on a 30 minute chart.
If in doubt, refer to the longer time-frame. Underlying longterm trends are more significant than shortterm trends.
regards
Stochastics ( like most oscillator systems ) is only of use in sideways markets.
Once a real trend has been established , you're better of using trendfollowing indicators, such as MA or Bollinger bands.
For shortterm, you could use an 8 / 13 period MA crossover system, but keep an eye on your stochastics. Use the slower MA as stop-loss level .
Also, an MACD system could be of some help, if you rely heavily on those kind of indicators.
If you want to trade only with with stochastics, use the same setting of periods, but a longer time frame.
A 14/3 slow Stoch may signal oversold readings on a 3minute chart, while it barely has moved on a 30 minute chart.
If in doubt, refer to the longer time-frame. Underlying longterm trends are more significant than shortterm trends.
regards
Magna
Administrator
Agree with Dustin, ADX is an excellent indicator to show strength of trend. Of course it doesn't show which way the trend is going, but there are many other methods to show that (along with Wilder's +DM and -DM). Unfortunately many charting services don't offer ADX (i.e., TC2000, CyberTrader) but many do.
Magna
Administrator
Dustin,
Actually ADX does show which way the trend is going.
What I meant is that ADX by itself does not show which way the trend is going, only the strength of the trend. When combined with, say, Directional Movement (Welles Wilder, the creator of ADX, called it +DM and -DM, but many people call it DI+ and DI-) it's fairly easy to determine the direction. And there are many other means to determine the direction, but ADX by itself does not give you that information.
Actually ADX does show which way the trend is going.
What I meant is that ADX by itself does not show which way the trend is going, only the strength of the trend. When combined with, say, Directional Movement (Welles Wilder, the creator of ADX, called it +DM and -DM, but many people call it DI+ and DI-) it's fairly easy to determine the direction. And there are many other means to determine the direction, but ADX by itself does not give you that information.