The Stochastic Indicator
- Thread starter jack hershey
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Alain,
Stochastics IS NOT A RELIABLE trend indicator.
Using Stochastics during parabolic trends...up or down...is high risk trading.
Stochastics is more suited as a chop or tight-trading range indicator.
Simply, first you must be able to identify whether your looking at a trend or tight-trading range...
after you've done that...then you can decide on the appropriate indicator to use when using indicators.
Hopefully this answers your question about how to apply Stochastics to trends...
answer: You Don't unless you enjoy low probability...high risk trades.
P.S. If you have the need to trade parabolic price moves...use one of the following or in combo...MACD, TICK (NYSE Up/Down Ratio) or Price Action Alone via basic chart pattern recogition or candlestick analysis.
Also...as always...don't use the Stochastics nor any other indicator all by itself...use something to confirm what the stochastic is saying.
Looks like I reached my goal...400 posts...I'll stop posting for awhile now.
NihabaAshi
Another tough call - everything looks good, but the MACD Histogram is not quite there...
11:15 Short at 837.25
I was somewhat distracted, and took the trade...when I saw that the Histogram was not where it should be I bailed with a 1/4 point.
Playing by the rules, as I understand them, I did the right thing - I think. It appears that this is no "rocket"
11:15 Short at 837.25
I was somewhat distracted, and took the trade...when I saw that the Histogram was not where it should be I bailed with a 1/4 point.
Playing by the rules, as I understand them, I did the right thing - I think. It appears that this is no "rocket"
This is a fine call and that is how it is for now. I am introducing "entwining" vis a vis alain.
Your next comment is great too the MACD says no and this indicates a flat market. You can see the money velocity on a trade is very low.
Here is where you practice wash trades if you took on the trade.
For ice berg people: you are in the trade short from almost the open. Keep the 20/80 tape on still. You see that by 11:15 when the market goes into slow gear that you heald the trade through the am. Now the 4 o'clock drift will set in. You can use the guidance of the MACD (being below neutral) as your guide.
For beginners we are out and we took one trade and not the second.
what is ahead for everyone: A slow day. The 13:15 is the nominal wake up time for the mark. what you are looking for is: icebergs will see a above 80 to take them out of trade. The MACD fast line will cross up over slow line.
If this becomes a rocket, then look for immediate divergence on the MACD and the histogram going to .4 and you enter. this puts the icebergs into the trade tooo but not as a reversal. it is an exite pause and an entry.
here is the spectrum of how back testers have reported:
.84 for a loss of 5,878 over five years; .71, for a loss of 12.735 over five years; and this post.
i hope this continues to parallel the effort.
The next most helpful runs will be based on :
1. Alain "entwining" observation and being put into practice.
2. Wash trading when no trend is here.
3. beginning stop logs so we can have trailing stops
4. Using the end of trailing stops as a signal to exit on the other side of the channel for max profits
5. Beginning icebergs
It will become observable how each iterative refinement improves the back testing. what also emerges is the software to run the stuff mecahnically.
The best part of all of this is the way the Neuroliguistic Programming changes for people. so far we have a neat spectrum of views that do depict quite well how most people are programmed.
The pictures we see have no negatives in them. If people have market rules that are expresded negatively; the mind is not created the picture they desire. The rules have to be restated to make them work as pictures.
"don't fall down on the ice."
"Walk carefully on the ice."
Okay now you get it.
nearly 13:00.
Now you see all the stuff we expected.
4 O'clock drift on low volume.
Lower volatility.
"entwined lines on stoc and MACD.
we are set for the signals that i suggested would show up for making money
If not we stay at a low risk place: beginners sidelined after a fast paced profit and icebergs piling up nickels steadily.
The backtesters are forward testing now too and they are working on the next six levels of back testing coming up.
some people have done a wash or two to see how nice it works in this falt current pace.
Now you see all the stuff we expected.
4 O'clock drift on low volume.
Lower volatility.
"entwined lines on stoc and MACD.
we are set for the signals that i suggested would show up for making money
If not we stay at a low risk place: beginners sidelined after a fast paced profit and icebergs piling up nickels steadily.
The backtesters are forward testing now too and they are working on the next six levels of back testing coming up.
some people have done a wash or two to see how nice it works in this falt current pace.
Jack
How long after the open do you wait for a trade if it starts out below 20. I have read some posts with you talking abou the need to let the market "synch" before entering.
Today for example, I waited for the first 2 5m bars and went short at 842.50 (below previous 5m bar's low)...On my exit i was seeing the 1m MACD XO at 10:05 and the it crossed over 0 at 10:16. And the 5m appeared ready to XO these combined had me exiting at 839.25 for a 3.25 gain. Also, the 5m MACD reached a peak low of -2.86 at 10:00.
One other comment on your explanation of rocket for a beginner.
We enter when both break below 20 (or above) with the hope that they entwined and we then have our rocket. If they DO NOT entwine and the fast line leaves you could look at that as a divergence and potnential exit since our rocket never formed.
How long after the open do you wait for a trade if it starts out below 20. I have read some posts with you talking abou the need to let the market "synch" before entering.
Today for example, I waited for the first 2 5m bars and went short at 842.50 (below previous 5m bar's low)...On my exit i was seeing the 1m MACD XO at 10:05 and the it crossed over 0 at 10:16. And the 5m appeared ready to XO these combined had me exiting at 839.25 for a 3.25 gain. Also, the 5m MACD reached a peak low of -2.86 at 10:00.
One other comment on your explanation of rocket for a beginner.
We enter when both break below 20 (or above) with the hope that they entwined and we then have our rocket. If they DO NOT entwine and the fast line leaves you could look at that as a divergence and potnential exit since our rocket never formed.
Your comments are right on and very precise.
the ice bergs (intermediates) were (are) slogging along with few signals.
The beginner signals may be frustrating in comparison but they really do achieve getting a near consciousness. The syych is important. The open "end effects" secrew things up.
Later we will do some stuff related to "what is the trading fractal today?" the simple statement is to go to slower and solwer one to get a smoother picture of the situation. But at the same time use a faster fractal to see what to anticipate. Try this.
See how it relaxes you as well.
For formation folks, on the 5 min, there is a nice BO down into congestion, convergence, and cebtering. the BO down out of the centering was nicely set up by the VDU's before the BO down. DU is dry up volume and V is very. this is simulated by an RSI with default like the 5,2,3 Stoc. The 13:15 is as good as this ccc was. ccc means congestion, convergence and centering.
As you can see 13:15 is a little late today.
1. Now with "entwining" the method becomes very subjective. doesn't it? How much entwining, in what rhythm, etc.. at what can a divergence be recoginized and being separated from entwining?
3. How are stops defined? Could you please go more into details regarding stops.
4. Could you also please go more into details regarding this point.
Thank you,
Alain
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