How to trade with an oscillator

[Smart_trade]

Hi ST,
Thank you so much for your wonderful thread. I have a small clarification here. If stochastic stays more than 8 or more bars means, we shouldn't go for the long? I am not much clear on this point.

Could you please elaborate bit if your time permits?

Thanks
Bala

If the stochastics remains in overbought region for 5 bars and above, it means that the market is excessively overbought but this also shows strong market and it is dangerous to sell into such strong market. So one can buy this market with a close stoploss as this strength is going to continue for few more bars....may be 4-5 bars more but it is a high risk entry and the strength does not continue indefinately.....after few bars the bullish pressure dissipates by giving divergence or otherwise and the market reverses its direction.....

Hope the above clarified the use of oscillators and not added to the pre-existing confusion.....

Smart_trade

 

[krish4166]

ST
We have to wait to look for qualifiers and take position, it happened today on 5 min TF I was able to profit few points. I think for beginner like me it is better to wait for these kind of qualifiers instead of losing money trading without strategies.

 

[balasoft80]

yes and I got clarified. Once again thanks much for great thread.

 

[krish4166]

ST, gr8

 

[krish4166]

ST, have to wait for rewards gr8

 

[DanPickUp]

If the stochastics remains in overbought region for 5 bars and above, it means that the market is excessively overbought but this also shows strong market and it is dangerous to sell into such strong market. So one can buy this market with a close stoploss as this strength is going to continue for few more bars....may be 4-5 bars more but it is a high risk entry and the strength does not continue indefinately.....after few bars the bullish pressure dissipates by giving divergence or otherwise and the market reverses its direction.....

Hope the above clarified the use of oscillators and not added to the pre-existing confusion.....

Smart_trade

Hi ST

What you explain here remembers me a little bit about Miners System. First counting how many bars it takes from high to high or vice versa to define the entry. Then have a look at stochastic.

Now choose a lower time frame and do the same. If you recognize a similar picture, enter the market with a small stop loss. This is just a very simple explanation of what he does.

As far as I remember : He enters a trade with a few units and takes then out unit by unit. I never calculated, which system is more successful, as there is always some kind of random, what ever you do.

DanPickUp

 

[murthyavr]

Why don't you, Dan, post the complete details of the Miners system with exact entry/exit/Stop rules? What is the randomness in that theory? Are you very familiar with this system?

What is the randomness in ST's strategy? You mean the failure rate? How much is that according to your study? Or is there somethingelse?

One needs to be thorough in both the systems to make an attempt to compare them.

Otherwise, commenting that the system contains "..randomness", without supported by proper study and material, would amount to an opinion, based on bias!

 

[Smart_trade]

Hi ST

What you explain here remembers me a little bit about Miners System. First counting how many bars it takes from high to high or vice versa to define the entry. Then have a look at stochastic.

Now choose a lower time frame and do the same. If you recognize a similar picture, enter the market with a small stop loss. This is just a very simple explanation of what he does.

As far as I remember : He enters a trade with a few units and takes then out unit by unit. I never calculated, which system is more successful, as there is always some kind of random, what ever you do.

DanPickUp

Hello Dan, thanks for your inputs.

I have never studied or worked with Miner's system so I m unable to offer any comments about its similarity or otherwise with my method. If you are talking about Robert Miner, I did attempt to learn from his works when I was starting out in trading but I could not make much progress with it.....definately my fault .

From your description I get a feel that it studies the fractal in longer time frame and then gets down to lower time frame if you see a similar fractal ...this is a pretty good way of trading....but I have never tried so unable to offer any inputs on the same.

My method is based on the work of Thomas DeMark....who had done extensive work on many trading and TA subjects including Sequential,Trendlines and Oscillators.

Here the method tries to eliminate randomness and subjectivity as much as possible. But as the market is a dynamic entity we need to change the parameters to suit the current market structure. That is why you will find that in a uptrending market, the stochastics never comes to below 20 but turns up from 35 or 30 on lower band and in downtrends it does not go above 80 and turns down from 65-70 band....similarly instead of 5 bars in OB/OS region one may find 7 works better but these changes are necessary in any method......so we cannot call it randomness really......

Always use stochastics with some other entry technique such as pivot high/low to increase the chances of its success....

Your constructive inputs are most welcome...keep them coming....

Smart_trade

 

[Smart_trade]

Why don't you, Dan, post the complete details of the Miners system with exact entry/exit/Stop rules? What is the randomness in that theory? Are you very familiar with this system?

What is the randomness in ST's strategy? You mean the failure rate? How much is that according to your study? Or is there somethingelse?

One needs to be thorough in both the systems to make an attempt to compare them.

Otherwise, commenting that the system contains "..randomness", without supported by proper study and material, would amount to an opinion, based on bias!

murthyavr,

You probably misunderstood Dan's post as a criticism on my method...but we know Dan for a long time and he will always give constructive inputs.....and his "randomness" is not referring to the method but the parameter of 5 bars to be observed for excessive OB/OS condition.....and I have expressed my views in the post above....

I have always maintained that if 2-3 methods/indicators/tools /market analysis point to a particular trade, then that trade has high chance of success......

Smart_trade

 

[murthyavr]

I'm sorry if I misunderstood Dan's post; I thought he was commenting on the whole system in a generalized fashion. Hence the misunderstanding.

As you pointed out, the parameters need fine-tuning as per market dynamics and also to suit the individual's risk profile.

Thanks..