Day trading Basics

[burai123]

thank you for your thread. i am also learning from you through your posts.

 

[manojborle]

Hi friends

I will be busy this week for my job related course in Mumbai, so may not get time to study.

I will start posting from next week again, till then bye.......

 

[manojborle]

Intraday Applications of stochastics

What is stochastic ?

The detailed explanation can be found here....

http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:stochastic_oscillator

There are 3 types.
1. Slow Stochastic
2. Fast stochastic
3. Full stochastic

We shall consider Slow stochastic as it will produce slower oscillations.

Basic approach to SI :


1. %K and %D crossover signal

One method of SI timing is to use Slow SI for Buy and Sell signals on crossover of %D and %K SI lines
We will use 8 period first....

5 minute time frame

15 minute time frame

30 minute time frame

Now we shall increase the time period from 8 period to 24 period and see what difference does it make


5 minute time frame

15 minute time frame

30 minute time frame

 

[manojborle]

Intraday Applications of stochastics

What is stochastic ?

The detailed explanation can be found here....

http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:stochastic_oscillator

There are 3 types.
1. Slow Stochastic
2. Fast stochastic
3. Full stochastic

We shall consider Slow stochastic as it will produce slower oscillations.

Basic approach to SI :


1. %K and %D crossover signal

One method of SI timing is to use Slow SI for Buy and Sell signals on crossover of %D and %K SI lines
We will use 8 period first....

5 minute time frame

15 minute time frame

30 minute time frame

Now we shall increase the time period from 8 period to 24 period and see what difference does it make


5 minute time frame

15 minute time frame

30 minute time frame

By increasing the time period, oscillations have reduced but this method still produces many false signals.

 

[manojborle]

2. 25 percent and 75 percent SI crossover

Generally speaking a reading of 75 percent or higher is considered Overbought and reading of 25 percent or lower is considered Oversold.

 

[manojborle]

Since the SI can remain in Overbought or Oversold condition for longer period, sell decision made simply based on overbought or buy decision made simply on oversold condition should be avoided.

 

[manojborle]

The author has described a method called "Stochastics pop".
It is termed so because "it enters markets when most traders consider the market to be overbought or oversold".

This method takes advantage of buying when momentum is strong and selling when momentum is weak.

Rules for Buy Entry :
1. Buy signal will be generated when %K is at 75 or higher at the end of time frame you have selected.
2. Buy order should be at the market.
3. Once the entry is made, Exit can be any of the following ways...
---- Risk management sop loss (i am trying with stop loss below the low of the candle.
------- as soon as %K and %D have crossed over one another in the selected time frame.
4. exit should also be at the market.

Rules for Short Entry :
1. Short signal will be generated when %K is at 25 or lower at the end of time frame you have selected.
2. Short order should be at the market.
3. Once the entry is made, Exit can be any of the following ways...
---- Risk management sop loss (i am trying with stop loss above the high of the candle.
------- as soon as %K and %D have crossed over one another in the selected time frame.
4. exit should also be at the market.

 

[manojborle]

Exit method used here is crossover of %k and %D.

I will try to write afl to use low of previous candle for exit.

 

[manojborle]

Exit method used here is crossover of %k and %D.

I will try to write afl to use low of previous candle for exit.

As can be seen from the chart, the signals for exit are coming within the next candle, so will have to do something about exit strategy.
anyways even if there are whipsaws, one correct move is giving sufficient profit for intraday.

Most important : we are trying to develop a system for intraday, so at the end of day you should not have any open position even if exit signal is not there.

 

[manojborle]

As can be seen from the chart, the signals for exit are coming within the next candle, so will have to do something about exit strategy.
anyways even if there are whipsaws, one correct move is giving sufficient profit for intraday.

Most important : we are trying to develop a system for intraday, so at the end of day you should not have any open position even if exit signal is not there.

So now I changed the exit condition and now it is based on the low or high of previous candle for Buy and short entry respectively.

We can see the result is quite improved, but our primary condition is that we have to square off our position at the end of the day.

I don't know how can I write this condition into AFL ?
Expect some help from members.........