Stochastics and MACD Histogram for daytrading?
- Thread starter pstallone
- Start date
I agree that MACD and Stoch are good for confirmation but I dont base my trades on thier signals. I use EMA's to guage direction(shorter term EMA, and a return to value(longer term EMA). If the short term ema crosses through the longer term EMA I buy if the EMA returns to the EMA and then bounces up, I buy. I do the opposite on the short side. Also with the volatility the market shows in the opening 30 minutes I find MACD and Stoch pretty much useless during this time and I would say the same thing about the last 30 minutes as well.
Paul, I use stochastics mainly as an entry signal and sometimes to guide my exits as well. You have to be careful not to depend on them exclusively, because other factors come into play that override them. The market direction is important. If using oversold stochs (below 20%) for a long entry signal, ask yourself:
a) is the overall market trend up? (Don't fight the market unless you're looking to grab a small move.)
b) is this oversold condition a new low for the day (LOD) or is it a higher low? (Failure to make a new low is a strong long signal, but man who tries to pick bottom is often left with stinky fingers.
c) where is the stock trading compared to its range on a 30- or 60-day chart?
d) is the volume on rallies stronger than the volume on declines?
These are just a few of factors to consider. (And it's the opposite for shorting, but sounds like you have a long bias.)
One other thing I've observed about stochastics is that if the line moves in a steep, uninterrupted trajectory from overbought to oversold (or vice versa) and pivots sharply, the reversal is usually strong enough to make for a profitable trade.
The nice thing about using highly overbought/oversold stochastic entries is that you can set a tight stop to limit risk, because obviously if it's truly overbought or oversold, the trade should move in your favor.
Hope that's helpful!
Donna
Actually I do most of the following:
a) is the overall market trend up? (Don't fight the market unless you're looking to grab a small move.)
b) is this oversold condition a new low for the day (LOD) or is it a higher low? (Failure to make a new low is a strong long signal, but man who tries to pick bottom is often left with stinky fingers.
c) where is the stock trading compared to its range on a 30- or 60-day chart?
d) is the volume on rallies stronger than the volume on declines?
The problem is the MACD Crossover anyway, is a lagging Indicator, I do intend to make more use of time charts, rather than tick charts.
I am also interested in shorting also. Most of my trades go from a minute or 2 to a few hours max.
The problem, I have found, is that there is little agreement, about the proper way to establish entry signals.
If it was simple, I guess we would all be rich. I appreciate your comments though!
