Quote from fearless9:
On a 1 minute chart, you really will not need too much testing, just be aware of the shape of the day/hour/30M when you take your stoch readings.
Dont pay too much heed to the stoch consistency but rather concentrate on your ability to use it consistently.
ie on a 1M, what are you trying to achieve, given that the price wobbles along in channels.
Are you trying to fade the extreme points or are you trying to breakout of channels in which case your risk will be the channel depth plus a tic or two.
The stoch is only going to highlight a piece of price action that is already embedded in the chart. The same can be said for any indicator quite frankly.
I use price/volume on the ES and the only packet indicator I use is stoch as it highlights the position of the price relative to it's channel.
I do not use it as a signal, merely as a highlight.
Someone mentioned they prefer MACD and my comments apply directly to that indicator as well.
Bear in mind that the stoch is described as a momentum indicator, but extend it's look-back sufficiently and it shows trend. In reality trend and momentum are one and the same. It all depends upon your trading philosophy as to how you use them.
Because I trade in a frame just above that of a Scalper, my motto is
"one man's noise is another man's Ferrari"
What I am saying to you, is that you need to take a number of nested decisions first and then your use of an indicator will more or less drop into place within your trading philosophy.
fearless
thank you so much for your response
and to all of you that response on this thread, thanks
it proves that still we can have an educated conversation about trading on this site
I've been trading all my life with two simple S/R lines. I have no complaints. I tried Moving averages once but no success. I start looking at stochastics just this past couple of weeks and the results I got were more than I expected.
Very interesting what you said about channels, fearless I will look into that
to give you guys my rules in detail so far here it goes
1) Stochastic 14,3,3. 25 oversold and 75 overbought
2) 1 minute candlestick charts ( I still think hammers are powerful)
3)The candles will highlight every time the price goes above 25 or bellow 75
4) I am using a risk/reward ratio of 1/1 as I am not very familiar with YM but so far so good
if there's no announcements at 10:00 am I consider the first signal only if price makes a new high/low after the signal
If there's anything at 10:00 AM , then I wait up to the market comes from oversold/overbought.
I tried to put in the mix some other indicators like MACD, etc but as I've been trading price all my life, I 'll stick to what the price says.
I backtested as far as Feb 20 2007 and the results are simply amazing. But I think fearless is right. You don't need to backtest it as is more on how we used in other words is not the the tool but how you apply yourself using it. My observation so far is that helps me see what the price is dictating in a more pictorial way. As I said before, I think is completely wrong to trade indicators, you should trade price. Indicators should be used as the word implies, they indicate, that's it.
By the way, I am testing it on YM as is more gentle on the swings that mini Russell (I trade ER2 consistently) but I guess you could try it on any of the indices. Nothing wrong with YM on the contrary I think trends very good
If anybody has some input on this subject please don't hesitate.
Again to all of you, thank you so much for a well-educated conversation. Definitely sets an example on this site.
