The Stochastic Indicator
- Thread starter jack hershey
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hwaxen,
>>Indicators take you away
Indicators lag and respond to the market. If you use an indicator to trade you are waiting for a signal and then lagging the market on your entry and your exit. A trader will have more success if he watches the market, anticipates, enters the trade and controls any errors with stop losses<<
I started trading 11 years ago with a rudimentary real time feed, a pen and graph paper. If you are claiming that a trader would have more success by getting the feel of the market by observing and using some form of bar\candle relationship then you may be right but you would need abilities way outside my or anyone I know's capabilities.
I have used bar relationships with Crabels "short term price relationships" and a multitude of candle formations based HLC, mid price, high price, low price and just about any relationship imaginable. I use three different time frames on each market and trade three simultaneously and although I am loath to admit it, I could not function without indicator helpers.
I have read every page of this thread and although I do not use Jack's principles as he has stated them (variations on his theme) they are of enormous value and a bit of a masterclass in trading techniques, all for free. I guess we all owe him a big thankyou.
The stochastic is known as the near co-incident indicator. It cannot lead where price has not been but it will signal on the close of the bar that flashes the signal for all but the contrarian anticipators. If it is set to update on every tick it will flag on a tick (during bar creation) when a signal is possible and in essence it is just as good as using any part of the bar\candle under creation. The MACD is often a bar+ later than the initiating signal but there are many other qualities of the MACD which come into play as secondary confirmation. Both the Stochastic and the Macd show the underlying wave formation and throughout the formation of a trend they hold a gap as confirmers and display cross-overs that are below\above trend and by crossing through 50 (Stochastic) and 0 (Macd) show trend changes. Lateral congestion can be seen by the slow line in the MACD without need to look at the charts. There is so much than can be gleaned from these two indicator combos that when added to channel use makes the non use of indicators archaic.
Although much of Jack's usage is not exactly want I want or needed. Trading the Stochastic "POP" is the cream on my milk not the actual drink<g>, I can see that he has set the indicators and methodology to use a useful and safish part of a run for profit. I never bothered with volume before and found intense irritation when a very fast run rapidly screamed back on me but not any more<g>. I was always getting chopped up in those violent fast large swings at the open but now find that the indicators can keep me correctly positioned.
For people who are curious and willing to work through this thread diligently and do loads of lateral thinking, the rewards are potentially beyond belief. I have used more methods than I care to think about but, with personal modifications, this has been of immense value.
Traduk
>>Indicators take you away
Indicators lag and respond to the market. If you use an indicator to trade you are waiting for a signal and then lagging the market on your entry and your exit. A trader will have more success if he watches the market, anticipates, enters the trade and controls any errors with stop losses<<
I started trading 11 years ago with a rudimentary real time feed, a pen and graph paper. If you are claiming that a trader would have more success by getting the feel of the market by observing and using some form of bar\candle relationship then you may be right but you would need abilities way outside my or anyone I know's capabilities.
I have used bar relationships with Crabels "short term price relationships" and a multitude of candle formations based HLC, mid price, high price, low price and just about any relationship imaginable. I use three different time frames on each market and trade three simultaneously and although I am loath to admit it, I could not function without indicator helpers.
I have read every page of this thread and although I do not use Jack's principles as he has stated them (variations on his theme) they are of enormous value and a bit of a masterclass in trading techniques, all for free. I guess we all owe him a big thankyou.
The stochastic is known as the near co-incident indicator. It cannot lead where price has not been but it will signal on the close of the bar that flashes the signal for all but the contrarian anticipators. If it is set to update on every tick it will flag on a tick (during bar creation) when a signal is possible and in essence it is just as good as using any part of the bar\candle under creation. The MACD is often a bar+ later than the initiating signal but there are many other qualities of the MACD which come into play as secondary confirmation. Both the Stochastic and the Macd show the underlying wave formation and throughout the formation of a trend they hold a gap as confirmers and display cross-overs that are below\above trend and by crossing through 50 (Stochastic) and 0 (Macd) show trend changes. Lateral congestion can be seen by the slow line in the MACD without need to look at the charts. There is so much than can be gleaned from these two indicator combos that when added to channel use makes the non use of indicators archaic.
Although much of Jack's usage is not exactly want I want or needed. Trading the Stochastic "POP" is the cream on my milk not the actual drink<g>, I can see that he has set the indicators and methodology to use a useful and safish part of a run for profit. I never bothered with volume before and found intense irritation when a very fast run rapidly screamed back on me but not any more<g>. I was always getting chopped up in those violent fast large swings at the open but now find that the indicators can keep me correctly positioned.
For people who are curious and willing to work through this thread diligently and do loads of lateral thinking, the rewards are potentially beyond belief. I have used more methods than I care to think about but, with personal modifications, this has been of immense value.
Traduk
Traduk,
very good posting.
because, years ago, Jake Bernstein wrote in his book -The Compleat Day Trader- about the -Stochastic POP-
did you learn the -Stochastic POP from Jake Bernstein's book?
Jack's adding of the MACD, Volume and channel is a very big improvement for the Stochastic POP setup. IMO.
thanks again for your posting and thanks to Jack for his postings, and I hope Jack will soon post again on ET.
very good posting.
yes we all owe him a big thank you, IMO
interesting that you are mentioning the -Stochastic POP-
because, years ago, Jake Bernstein wrote in his book -The Compleat Day Trader- about the -Stochastic POP-
did you learn the -Stochastic POP from Jake Bernstein's book?
Jack's adding of the MACD, Volume and channel is a very big improvement for the Stochastic POP setup. IMO.
thanks again for your posting and thanks to Jack for his postings, and I hope Jack will soon post again on ET.
hit n run,
Yes it was in Jake Bernstein's book that I learnt about the "Pop". Jake actually used it to catch the 5th Elliot Wave which after a powerful third wave gave less comparative momentum.
Jack appears to have suggested a very much shortened timeframe Stochastic which will spend most of a powerful trend above 80 or below 20. The logic is good inasmuch as it shows a band 20\80 that is rapidly traversed and the holding above or below 50 and the clustering above or below 80\20 shows the dynamics of the trend very well.
There are many other forms of jargon that Jack could have used eg. centering, which is actually the oscillation to find a central pivot within congestion. In Market Profile jargon it is the creation of a mini bell curve after a run which may be accumulation or distribution. His ideas could be presented in a totally incomprehensible manner but he has kept it simple, even though I have to spend ages trying to work out what he means at times.
I started reading this thread 2 weeks ago (read it all) and during that time I have completely changed my approach from a mainly non indicator based methodology to TA components that vaguely resemble Jacks and my profitability has sky-rocketed. There have been some critics pop in and state that indicators are not the best way to go. In some ways they are correct as it is better to fully understand bar relationships and larger wave structures before using any indicators as support or reference. I have daytraded, fulltime for 11 years and was not profitable for nearly 5 of them. Anything that fast tracks a trader from being a loser to a winner in weeks\months not years has got to be good even if it requires a strong element of faith without strong knowledge of the underlying structure. If Jack's methods are followed exactly the only risk left is the fortunately rare massive price spike and the variations on themes that have seen countless traders that I knew crash out and leave markets should be avoided.
He stated that he was going to be away for three weeks so I guess normal progress will resume on his return.
Traduk
Yes it was in Jake Bernstein's book that I learnt about the "Pop". Jake actually used it to catch the 5th Elliot Wave which after a powerful third wave gave less comparative momentum.
Jack appears to have suggested a very much shortened timeframe Stochastic which will spend most of a powerful trend above 80 or below 20. The logic is good inasmuch as it shows a band 20\80 that is rapidly traversed and the holding above or below 50 and the clustering above or below 80\20 shows the dynamics of the trend very well.
There are many other forms of jargon that Jack could have used eg. centering, which is actually the oscillation to find a central pivot within congestion. In Market Profile jargon it is the creation of a mini bell curve after a run which may be accumulation or distribution. His ideas could be presented in a totally incomprehensible manner but he has kept it simple, even though I have to spend ages trying to work out what he means at times.
I started reading this thread 2 weeks ago (read it all) and during that time I have completely changed my approach from a mainly non indicator based methodology to TA components that vaguely resemble Jacks and my profitability has sky-rocketed. There have been some critics pop in and state that indicators are not the best way to go. In some ways they are correct as it is better to fully understand bar relationships and larger wave structures before using any indicators as support or reference. I have daytraded, fulltime for 11 years and was not profitable for nearly 5 of them. Anything that fast tracks a trader from being a loser to a winner in weeks\months not years has got to be good even if it requires a strong element of faith without strong knowledge of the underlying structure. If Jack's methods are followed exactly the only risk left is the fortunately rare massive price spike and the variations on themes that have seen countless traders that I knew crash out and leave markets should be avoided.
He stated that he was going to be away for three weeks so I guess normal progress will resume on his return.
Traduk
Hit n run,
I do not know what timing you use or on which market.
I am afraid that my answer is a non committal, use what works best. Using Jack's defaults are best to start with and progression will come from careful observation of what works and then determining why. For example, I do not use his defaults but use period timings that represent, slightly less than, the most common number of bars in a run\reversal for each timeframe and market.
I trade Eurex, Liffe and the Cme and switch between equity futures and bond futures. They are all different animals and one size does not fit all, for my needs. The objective of a setting is to be within the most frequent turn interval and definitely not to be longer. Jack's default will be within virtually everything and needs to be treated as something that will quickly hit upper and lower levels. How much wiggle room is given after it goes through 80\20 or 75\25 is up to the individual and I do not wish to interfere in any way with Jack's approach. When a market moves dynamically it will stay above or below the bigger numbers but when lacks the dynamic lustre it will more lazily bounce off of 75\25. If I have got it right, he would prefer people to stay only in the dynamic area where profits are easier. It becomes individual judgement as to wether one wishes to explore less dynamic areas.
The use of channels with failures to traverse leading to possible congestion zones or possible reversals is IMO the glue that sticks the method into a workable plan.
Traduk
I do not know what timing you use or on which market.
I am afraid that my answer is a non committal, use what works best. Using Jack's defaults are best to start with and progression will come from careful observation of what works and then determining why. For example, I do not use his defaults but use period timings that represent, slightly less than, the most common number of bars in a run\reversal for each timeframe and market.
I trade Eurex, Liffe and the Cme and switch between equity futures and bond futures. They are all different animals and one size does not fit all, for my needs. The objective of a setting is to be within the most frequent turn interval and definitely not to be longer. Jack's default will be within virtually everything and needs to be treated as something that will quickly hit upper and lower levels. How much wiggle room is given after it goes through 80\20 or 75\25 is up to the individual and I do not wish to interfere in any way with Jack's approach. When a market moves dynamically it will stay above or below the bigger numbers but when lacks the dynamic lustre it will more lazily bounce off of 75\25. If I have got it right, he would prefer people to stay only in the dynamic area where profits are easier. It becomes individual judgement as to wether one wishes to explore less dynamic areas.
The use of channels with failures to traverse leading to possible congestion zones or possible reversals is IMO the glue that sticks the method into a workable plan.
Traduk
Jack proposes buying the move above a high stochastic level. But I don't trade trends, I trade counter to trends.
So I am curious if anyone following this thread would like to take a challenge and have a little fun.
If you have Jack's indicators and the appropriate data already loaded, (I don't use TS) I would be curious to see what the results would be of backtesting on SELLING at a high level of stochastic and BUYING at a low level, with the same MACD settings in place. This would be directly the opposite of his strategy.
Using the same indicator settings for stoch and MACD, try going short at a stochastic level of 80, and going long at 20. Don't wait for a reversal bar to confirm a change in direction. Just go long or short at the close of the bar that hits those levels.
As to profit targets or stop, use your own discretion with settings. Play with it, and I'd be curious as to what you come up with.
So I am curious if anyone following this thread would like to take a challenge and have a little fun.
If you have Jack's indicators and the appropriate data already loaded, (I don't use TS) I would be curious to see what the results would be of backtesting on SELLING at a high level of stochastic and BUYING at a low level, with the same MACD settings in place. This would be directly the opposite of his strategy.
Using the same indicator settings for stoch and MACD, try going short at a stochastic level of 80, and going long at 20. Don't wait for a reversal bar to confirm a change in direction. Just go long or short at the close of the bar that hits those levels.
As to profit targets or stop, use your own discretion with settings. Play with it, and I'd be curious as to what you come up with.
Didn't have time to trade much this week.
Tue I was watching the mkt but didn't take any trades.
Fri
One trade:
Short rocket after 10am report
10:07 Short 992.25 rocket -> down vol picked up again
11:31 Cover 986.50 MACD x -> rocket failure -> channel BO
+5.75
Week +8.75 (2 trades)
Good trading!
Tue I was watching the mkt but didn't take any trades.
Fri
One trade:
Short rocket after 10am report
10:07 Short 992.25 rocket -> down vol picked up again
11:31 Cover 986.50 MACD x -> rocket failure -> channel BO
+5.75
Week +8.75 (2 trades)
Good trading!
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