Stochastics

[MandelbrotSet]

Quote from Stealth Trader:

Your further evasion notwithstanding, I haven’t “followed” you anywhere. Fact is, you came here after I had already posted and I was your first reference. But hey, let’s not allow facts to get in the way of your delusional outbursts. I merely pointed out your hypocrisy, inability to answer simple questions, the fact you post nonstop during trading hours, your constant backpedaling, and the reasons you are ET’s resident clown who’s nothing but all noise and zero substance. No offense intended, of course.

As for price action, luck has nothing to do with it. But your utmost concern is most appreciated nonetheless.

I leave you with this quote……straight from YOUR keyboard to our screens:

you "get it" by learning how to read price action.You are correct in saying that most indicators are not very usefull ... but reading price action is.
http://www.elitetrader.com/vb/showthread.php?s=&threadid=121269&perpage=6&pagenumber=2


Enjoy a great weekend!!!!!

st

Nope nutcase, I came here to talk about using the stochastic indicator, you came here to talk trash to anyone and everyone who discussed its usage (classic troll behavior Holy Grail ... it's not the number of posts, it's the contents of the postings ... duh).

As far as posting during market hours ... assuming you actually are trading (big assumption) your "naked chart" where you are constantly trying to figure-out which way is up all I need are little automated signals (hmmm, I did mention that before, seems like someone has a reading comprehension problem) whenever it's time to take a trade.

Yep, wish everything was this easy ...

 

[Goinglite]

Quote from Stealth Trader:

Are you willing to post that chart using the eminis? I don’t have data for GBP.JPY to post a comparison.

st

In edit: For clarity, please explain your definition of what "canned" is and isn't. Thanks.

In reply to your earlier post, after the fact charts are not an accurate depiction due to the reality indicators as shown within this thread will often poke up through a line or cross each other only to quickly reverse in real time. Trying to pick bottoms with this method typically ends up leaving the user with nothing left but smelly fingers. Hind sight is always 20/20. It doesn't validate anything.

Forex data is free. Just download a demo of "Metatrader".

Canned usually refers to indicators that are included in most charting packages.

Regardless of how you set them, in my opinion, they are still "canned".

In picking tops and bottoms, you are absolutely right. Indicators do "flicker". You need more than just a canned indicator, or for that fact, any other kind of indicator. (My ob/os indicators "flicker" a whole lot less than the canned ones. They are extremely stiff )

An indicator reading ob/os, or showing divergence means absolutely nothing in isolation.

Because Indicators lag price, "rising/falling" means nothing in isolation. There has to be other factors in play such as a clear understanding of various market structures. The color alerts are based on such market structures that go outside the boundaries of canned indicators that "flicker" and give misleading reading in real time that's not seen "after the fact". Other key structures were taken off the chart. (The bands on the earlier chart are not key structures.)

To get Newibies or struggling traders on the right path, as you have already mentioned, one way to get a clear understanding of the market is to use trendlines.

For traders that are not good with trendlines, adding a "zig zag" indicator to your charts will give you a start on where to draw trendlines. The zig zag indicator is not perfect, but for newbies, it's a start.

While you do puzzle me sometimes with some of your comments towards other folks. You have made some valid points.

I liked what you said about dual stochastics. For my methodology, im not a fan of the dual stochastics. It just doesn't fit well. But that's just me

In closing, I just want to say this.

If you have helped other traders become successful, then that's great. You have no problem with me.

I've helped my share of traders.

Im open to all kinds of methodologies. If they work, fine. If they don't work, make them work or just move on to something that does work.

The important thing is to trade, make money and be happy. If you can "give back" by helping a few along the way, great

Right now, im working on point and figure charts. If I find anything worth while, I will pass it over to Holygrail.

I will post one more chart before I go back into "posting retirement".

When you download the demo of metatrader, it would be nice to see how you see the GBP/JPY market in the context of price action.

Take care,

Goinglite

 

[Goinglite]

Last chart.

 

[SusanaDT]

Goinglite,

In my experience the problem with this indicator techniques is that if price decides to chop or trend very hard, it will get you killed.

I'm with ST on this one, I think all you need is found on price, if you need more info, use multiple charts but aside from that what else could you possibly need to see highs and lows.

Susana

 

[Goinglite]

Quote from SusanaDT:

Goinglite,

In my experience the problem with this indicator techniques is that if price decides to chop or trend very hard, it will get you killed.

I'm with ST on this one, I think all you need is found on price, if you need more info, use multiple charts but aside from that what else could you possibly need to see highs and lows.

Susana

Well, actually, there's a lot that can be seen. But that goes beyond the scope of what Im willing to talk about.
But your point is well taken. What's important is that you found something that works for you. That's all that's important.

 

[SusanaDT]

Quote from Goinglite:

Your point is well taken. What's important is that you found something that works for you. That's all that's important.

Incorrect

Due to commission slippage and bad calls I'm stuck in the break even range contrary to 99% of ET.

Shame on me

Susana

 

[Goinglite]

Quote from SusanaDT:

Incorrect

Due to commission slippage and bad calls I'm stuck in the break even range contrary to 99% of ET.

Shame on me

Susana

Hmmmmmm, what do you have on your charts? What charting service do you use?

When you get a chance, PM me.

 

[yoohoo]

I said I was not going to post again to this thread and my subsequent posts were part of a private discussion and not intended to demonstrate anything publicly. However, in the interests of trying to pay it forward, even in a very limited capacity, I will attempt to assist genuine information seekers on where to look for answers and to give some referees other than myself.

I think it is fair of ST to ask a simple question – what will an indicator tell that price action won’t. It’s actually simple to answer briefly but not without prior explanation, but the proof will require considerable study in order to learn techniques that are unfamiliar or to develop your own set ups.

But first of all I must strongly disagree with Jack that giving away my set ups would not be detrimental to my own trading. Sorry Jack, I agree with most of your posts if not with the length of your explanations. I thought you have traded size. It is impossible to trade size and show your hand – you move the market. In quiet periods I have had to scale in/out and that’s not my style – I am all in/out. I work out what volume at what time is usually acceptable for a fast fill and play accordingly. To tell all and sundry, here’s where I’m taking my trade is to choke my own throat.

This is the absolute unwritten rule for institutions and large traders – hide you hand rather than show it to all. Trading is a game where the strong money out manoeuvres the weak. With level II, taking a large position and trading it will instantly trigger programme trades that leave me with part filled orders and I won’t chase price – in this day and age you have to be smarter than that.

So Jack, my personal experience is that when the slice of the pie that’s available shrinks, smart money takes all.

Ok, lets get to back ST’s question and in so doing tie in what I wrote in reply to Jack. So what do indicators give us that Price Action alone doesn’t already provide? That’s a question with a library of books to provide answers – but you’ll have to search out the few good ones. Indicators are just tools in our hands and it’s like asking what do tools do for us? There are a myriad of tools for different jobs and likewise numerous indicators that each has a function. Gaining mastery of them is another issue. I am including everything from price boxes to volume to moving averages to oscillators as indicators for the purposes of this discussion... i.e. can PA alone be improved upon?

I would suggest that the seeker begins with reading Reminiscences of a Stock Operator – considered by many top traders as the best book on trading ever written. It discloses the development of Jesse Livermore’s technique, a PA trader who realised when he began to trade size that what moved the market was not PA, but Supply and Demand.

Jesse had a near photographic memory that allowed him to recognise PA behaviour that escaped most traders because there was no real time charts then – only a ticker tape. Trading small positions on PA was entirely different from trading size. With size it was essential to know if there was going to be a quality trade with a handsome profit.

This brings us to Volume as an indicator, and HG’s observation that he has seen the market move up $30 on low volume, thus volume as an indicator doesn’t work. Livermore observed the opposite was true, that lack of supply DROVE prices higher. He explained how big traders test supply and demand, and use the answer to run stops, and/or gap prices thru stops or supply leaving traders watching a fast market.

Wyckoff is the only operator I know of who fully discloses Livermore’s technique. It is what the market makers often use to move the market. There are many volume indicators but they fail to grasp that it is not necessarily what is happening in this bar, but what the volume in this bar tells about who is testing the market and that’s is related to a prior test.

To grasp this, please read The Undeclared Secrets That Drive The Market. That is why I added volume to the end of the candles. In real time I can see the market getting ready to reverse before the bar is complete, and the relationship to previous volume at this point tells the what kind of a move to expect.

Again, lack of supply – low volume – no sellers – drives the market higher fast, often with a gap. Smart money knows how to test the market using volume and market maker use software shows where the stops are grouped. They then leapfrog the stops so you can’t participate.

Volume studies are continually under development and about 2 years back there were complaints in the media that institutions were using VWAP (volume weighted moving averages) to dictate the direction of the market.

What will volume tell us that PA won’t? It gives a heads up when a market is about to reverse (before PA signals), tells the significance of the reversal, when stops are likely to be run, when the smart money/strong hands are in the market and when they do a “change of hands” letting the weak hands have the market for a short time only to see it turn on them. All of this qualifies PA or precedes PA. It is the reason big institutions developed VWAP and now they have further refined the volume model.

I demonstrated the use of EVRAA volume candles as a powerful assistant to PA in intraday trading the ES in real-time for 2 weeks on Echat, using it as a standalone indicator.

What about moving averages? Here’s something that has to be a lag indicator! Well it depends on how limited you are in your understanding of the power of moving averages. I demonstrated on ET and Echat how MA’s project future S&R that PA can’t see. For e.g. price approaches a prior high and PA traders are looking for a double top or a break out, but price reverses short of the prior top. MA’s project the exact resistance with amazing accuracy. Lag? Not if you know how to use them to see the future. Does it assist PA? Sure.

Cont’d…

 

[yoohoo]

Cont'd...
It was because of the power to predict that was latent in MA’s that Bollinger developed his bands. These are dynamic trading ranges and amazing in their ability to predict the onset of a fast move when PA is too messy to take a position – PA has to take the breakout. Combining MA’s with Bol Bands will get you into the trade before the breakout. But I have not read anything yet that discusses the power of B Bands. Try overlaying a few different time periods.

How can B Bands improve on PA? As price moves we would like to know if it’s a period of chop or trend we are going into or out or. If it’s chop we need to take the PA signals. If it’s trend the big guys will try and fool us and B Bands squeeze and say next move is a trend. It’s a visual aid.

I created the Xswing method of combining MA’s with Bol Bands to get a heads up in PA – where price wants to go to and how it will get there, where the S&R points are likely to be – in the future. Yes you can trade the PA alone, but sometimes the quality of the move is choppy and stops you out repeatedly – you need more in the way of a roadmap. Hence institutional VWAP, my Xswing and EVRAA.

MA’s can be used to uncover momentum shifts that are not at all clear with PA alone. Check ET for trading rainbows. This is good place to start but a lot more can be developed from this study. Emotion, Momentum, Supply &Demand are different descriptions of the same thing. It’s like a large ship turning, and observing the tell-tails left in the wake of the waves. At times it’s very difficult to work out how the momentum is shifting using PA alone, but MA’s are a fantastic aid to PA.

Caldwell, as I said, charges a fortune to train in the use of RSI. What does it do that PA alone can’t? It can get you in to a trade when PA’s messy and keep you in when PA has signalled a reversal that turns out to be a messy minor pull back. It’s an edge. Sometimes PA signals are clear, sometimes not. There are countless useless books on indicators and that’s why Cardwell charges so much – he has something of value.

PA is an art. Candles won’t reveal all PA signals – bar’s have different set ups to candles and are very powerful; in the 40’s the use of the mid point of the bar was a great discovery but it’s mostly lost now except in big candles. Steve Bigalow is my favourite CandleStick teacher. For years Steve cried PA alone – candles tell everything. Then he met a guy who used Steve’s set ups with indicators and Steve had to admit it qualified and improved his work.

I use stochastics, usually to trigger my entry and exit bar without lag. In market noise it’s invaluable, otherwise I need to go to a bigger timeframe to locate the PA signal outside of the noise, and if it’s really noisy I would otherwise have to take a bar takeout, or even a pattern break if it’s a complete mess.

I use stochastics to get me in before the news release. There’s a tell-tail in the micro charts that helps me read what the big players are doing. They have a 4 second advantage in the news release, but I see someone somewhere knows what’s happening even before this and I’m on to it. I honestly can’t read that move in PA because it’s microscopic but my stochastic amplifies it and gets me in just before the move. On Fx it means I get in on a small spread when the rest scramble on the same PA breakout with distant stops and big spreads.

The institutions have gone from indicators to complex algorithms, but for us there’s much mileage in indicators. If I take a large position the reaction time of the big players is less than 1 second. We are trading against computers and institutions have sacked lots of their top TA’s. Price Action isn’t enough.

I read and study and try to improve continually and it always amazes me that in an age of unbounded discovery there are traders who think what they have can’t be improved upon. Or the notion that I should disclose my life’s work and that it won’t injure my trading is plain crazy. There is at times in every day there’s a real lack of supply in the ES, especially in the summer months, and to have X-times the number of traders taking the exact same trades as me takes bread off my table.

I don’t mean every trade is like that, but I do mean there’s lean periods, and I have had to adjust position sizing to ensure I can exit without computers kicking in – and do I need to give a programmer more ideas?

If you want the proof that PA alone is not enough in a computer age – look at what the institutions have done to TA but also find out why they sacked their top TA and what they are doing instead. There’s more than PA alone, and I assure you the posts I have made here were not in retrospect – what’s the point in that?

OK – I’ve said it many times before – everything works. So what do indicators do that PA alone cannot?

Indicators will tell when supply is gone and big run is about to happen on low volume – expect the stops to be hit first before they run a fast market. They can tell which way the market will break just before a news event. They can clarify a messy PA set-up and get you in and keep you in when PA is fuzzy. They can tell you to enter before a PA signal bar is complete. They can tell you momentum is changing when PA is unclear – when chop is changing to trend before the HL HH set up completes. They can tell you when a PA signal is soft/minor or major. They assist, often lead, qualify and refine PA.

In order to learn you will need to read and study and even team up with a programmer to develop something that is personal. There’s a zillion books packed with indicators all telling you the same useless thing… and that’s why Cardwell can charge thousands to teach just 1 indicator and get so much out of it. It’s not because he can’t read PA!

I have always loved martial arts – there are two styles “Do” – a way of life and “Jutsu” – proven in combat. One is theory and correct in form and beauty. The other is life and death. There were moves I learned and spurned as sport techniques until I met an SAS instructor. He moved the placement of my hands slightly and angle of my wrist and one move became lethal, another devastating.

Indicators are like that; you can be so near and so far away.

I hope some will search out the power of indicators – after they learn PA. PA is the absolute foundation. There’s a thread here – how to trade a parabolic move. There were so many PA signals but PA alone would not tell you it’s going to be a parabola. Indicators can say it will be a powerful move so the parabola is of no surprise, nor is the need to hang in there.

Just so you know I have not kept all my cards close to my chest, ET has seen me demonstrate a little of the use of the 10 min price box and how the first few bars in the day tell you what kind of PA will take place for the rest of the day. I didn’t invent this method – a friend who like Jesse has an infuriating photographic memory did. If you want to know how contrived the market can be, the big guys not only determine the overall market action, but in the first 30 mins they have mapped out and disclosed the action for the whole day. Yes, the whole days’ PA is mapped out in advance – and yes you can learn it.

In my thread I mentioned how this was used to predict 3 gigantic intraday moves over a few days. These moves were almost 200 points in the YM in the space of 1 min. If you are good at PA – learn Box Trading – it will take it to a new level. Yes those moves were contrived and forewarned.

I hope ST I have answered your questions as to what indicators can do that PA can’t. I have to admit that I won’t show anymore than I already have so in answering your question I might leave out my proof, but the question was not “prove it” but what is the advantage of indicators over PA. Ask the moderators to restore my Interesting Charts Threads and perhaps I might to persuaded to disclose more.

To seekers: I have given books to read, websites to visit, techniques to research and hints on how-to. Beats me why anyone thinks I’d say this works when it doesn’t, but sure discourages me from revealing anything of my edge.

Good trading all. That means keep reading, researching, learning, testing, developing, practicing with real money and improving. Do it all with a hungry open mind. I feel I have a fair mastery of about 7 indicators plus PA – the rest I can’t understand. Your preferred indicators may be very different to mine but equally as powerful.

 

[Goinglite]

Yoohoo, nice write up.