The Stochastic Indicator

[vorzo]

Quote from dawg:

what does the software do with the following:

during the bar the fast stoch goes above 80, but closes below 80....would it exit you at the close or once in the trade your 2pt stop kicks in? thanks in advance.

dawg

dawg,

In this case, the software doesn't know that the fast line crossed in and out of the area - historical charts do not show occurences like this. The signal is simply not there.
One could go to a shorter time frame and look for a signal but it would be tough to code for a 5 min intrabar cross based on 1min data. Not impossible though, I'll think about it.

vorzo

 

[vorzo]

Quote from Walther:

Vorzo,
You did a great job ! If i am not mistaken , Jack also mentioned divergence in a past as an confirmation tool. If you have a time,try to test entries only after Stoch. and price divergence. It will cut down number of trades, but it should improve profitability.
Thanks,
Walter

Walter,

Can you explain what you mean by price divergence? Thanks.

 

[ges]

Quote from vorzo:



ges,

As Jack mentioned several times, the entry should be as soon as the fast line crosses into signal area (be it 75 or 80). Yes you get more false signals (fast line crosses during the bar and snaps out of the area before close of the bar) but that's where sequences, volume, etc. come into play.

vorzo

Then how do you test this in Wealth Lab? How do you treat those failed signals? Are you accounting for them? Just want to make sure, as it could make a huge difference. Right now test results look very good.

g

 

[ges]

Quote from vorzo:



dawg,

In this case, the software doesn't know that the fast line crossed in and out of the area - historical charts do not show occurences like this. The signal is simply not there.
One could go to a shorter time frame and look for a signal but it would be tough to code for a 5 min intrabar cross based on 1min data. Not impossible though, I'll think about it.

vorzo

Ahh...that means there are many (how many?) failed signals that would have been taken and you would have had to get out of. Without knowing how those trades impacted overall results, you can't give much credence to the test results. I'd say, the only thing you could do is test on next bar's open. If it is decent, then you can hope that in real trading you might improve on it.

This is a problem.

g

 

[dawg]

i think ges makes an excellent point. if you get a stoch cross during the bar and enter a buy, but it closes below the 75/80...and the mkt proceeds to go down...in REALITY you have a losing trade, BUT in the BACK TEST version it doesn't even show up as a trade. so we have unfortunately eliminated a losing trade that in REALITY would occur....and thus screwing up our results.

Now i don't know anything about backtesting, so i can't offer any suggestions.

BUT i think that is why some people have sugggested using the closing price on a 'good signal' for backtesting...at least you are sure you are not excluding the 'whip' losing trades. Otherwise you are omitting some losing trades.

just my 2 cents.

 

[jack hershey]

Let synch be at 945 or so.

Drawin the opening channel right line. I am abreviating this so people can see important stuff.

You are in short Rocket right at synch.

Note the exit on rocket corresponds to BO on channel.

Point 1 is in old formation. Note volume is sustained until first stall. A stall is bunch of bars same length and placed laterally. This is an odd harmonic and tells you that point 2 is coming up at a distance twice that covered at beginning of stall. You may think this is nonsense and too detailed but it will put you in a calm place.

Because of confirmation of all possible aspects of indicators at the channel BO, people who are making money consistently in this lousy market, can consider entried on BO's of channels. furthermore you can use MACD away maxes of fast lines or xo's or Divergence of MACD each as a signal that is a trigger as determined according to your skills and wealth. Note that there was a hesitation at 50% on the Stoc. (This is odd harmonic signal)

Note well (NB) the increase in volume coming off point 3. look for odd harmonic to follow again. this channel is a Monday channel. (Like a Friday one) Dawg sees this Mon Fri thing as a generally reduced volume.

Trade 1 was rocket.

Trade 2 is a slow trend trade out of BO 843 +/-. We stay with channel.


The backtesting quality is improving. What is at hand is this. Generally in the financial industry there are programmers and financial analysts. Each has skiils that are knowledge based and derivative of their background, training, interest and experience. It is not common that there are overlaps sufficient to be able to have a comprehensive view. You read their stuff to see which predominates. If the financial dominates,then the testing will not work out well. Vice versa , as well. If their is experience in both. then the bias goes to the positive end of the posible spectrum.

Our first three experiences led to "theres nothing new to test" under results that varied by an order of magnitude.

With the channel point 1,2,3 and Our ability now to get ready to slalom comming up, the testing does get difficult but at least now we have broken across into a positive result. Usually by introducing sideling (vis a vis wash trades) things flip positive by then.

 

[Walther]

Quote from vorzo:



Walter,

Can you explain what you mean by price divergence? Thanks.

For long entry:
Stochastic indicator makes higher low and price makes lower low.
Right after that stochastic will turn up and all other requirements for entering the trade are met. Today around 10:00est is the good example.
For short entry:
Stochastic indicator makes lower high and price makes higher high. Right after that, stoch. will turn down and other requierements are met.
Example of it is Friday 3-28 from 11:10 - 11:50 est on 5 min charts.
There should be example of it today around 13:00 or 15:00est.

Walter

 

[jack hershey]

We will be using more stuff related to formations as time goes by.

None of these details makes it harder. The fact of the matter is that all of this is just a consciousness raising activity like learning to drive a car. It will never get to a level of flight consciousness requirements.

People often are locked into a modus of straight unadulterated fear. They view all additional facets and more fear adding crap. They want to avoid this at all cost.

One person here who is trading on a wrong fractal wants more to do as he watches. His exits apparently are on stops set vis avis targets. He does not want ANY complications to improve what he does. This is fear turned into quasi panic.

We do the opposite. We are using strict simple techniques to make money. The more money made, the more we can relax. As we relax we can view the setting in greater depth.

First rockets only. Then washes. Now we add channels dutifully. I check to see if you number 1,2,3. I hope for that. It is a definitive deliberate action based on decisions. You go automatic on this.

Now I am beginning to take you through the life of a channel. this is going to be a terrific process. We want to exit channels on the max profit. We need to "read" the channel travrses and catch on to "What wasn't that?"

if yiu have a hitch which is a stall that is dipping; then you have less strength in a traverse. volume will be lighter too. A stall is a strong series of bars. It does not retrace like a hitch does.

At first i sent you to the fractal that "taped" so you couyld not see the traverses. They just appeared as equal length bars. Now we are opening up a little so we can max out on thrends.

Once we max out, we can learn to do reversals to stretch the next profit cycle. this is a two for one in profit making.

you make more on the first exit and you get into the next trade at optimum.

I had to do washes first to get you ready to max profits exits, max entries and BE PREPARED TO SLALOM on congestion.

Knowing hitches and stalls is part of this too.

 

[jack hershey]

Notice when we do not hit left side of channel like now.

See everything is shutting down too. Meaning going to neutral on MACD and 50% on the stoc.

 

[FRuiTY PeBBLe]

vorzo,

I noticed some people said there was an issue with some signals counting/not counting with the backtesting. What if you make trades on the close of 5 min bars only (both entries and exits)? Have you backtested trading this way?

FRuiTY