How to trade with an oscillator

[rangarajan]

Dear Smart,
I am attaching today's chart of Prakash,5min TF.
In my opinion,there was divergence as the stoch made higher high & price consolidation.till the end,the price never went up.So,the long never gave profit.
can u pl give yr comments.
Also,if stoch forms H & s pattern,can we trade it.

 

[Smart_trade]

Dear Smart,
I am attaching today's chart of Prakash,5min TF.
In my opinion,there was divergence as the stoch made higher high & price consolidation.till the end,the price never went up.So,the long never gave profit.
can u pl give yr comments.
Also,if stoch forms H & s pattern,can we trade it.

Market just drifted down...I dont see any divergence here...

Always use price action.....dont depend on oscillators as primary trading tool...use them as supporting tool.

Few people trade patterns on indicators....but I have not found them very tradeable....

Smart_trade

 

[timepass]

Rangarajan, what are your stochastics settings ??

 

[avad]

Dear Smart,
I am attaching today's chart of Prakash,5min TF.
In my opinion,there was divergence as the stoch made higher high & price consolidation.till the end,the price never went up.So,the long never gave profit.
can u pl give yr comments.
Also,if stoch forms H & s pattern,can we trade it.

In my opinion taking resistance and support levels of the last 3-4 days has been beneficial to my trades. If you observe in the nifty chart i have posted the nifty today was consolidated but never broke up or down. Always wait for thses major levels to break before entering the trade.

jst my 2 cents.

Also am learning that market i all about PRICE, PRICE PRICE. Indicators are afterward.If you want i have a few charts where the indicators have shown a sure trade but price went in opposite directions.:thumb:

 

[murthyavr]

Dear ST,

Here is a sample 8,3,4 stoch chart (MINIFTY-1 of 11.11.2011).

I have marked the peaks from 1 to 11 and also marked the troughs from A to J.

Now, if I draw a line from Peak-5 to Peak-6 and check for divergence in Price
during that period, such a check looks to be a valid check.

But, if I draw a line from Peak-3 to Peak-4 and check for divergence in Price during
that period, it somehow appears to be an invalid check - but I am not sure.

I am unsure about which peaks are valid for connecting and checking for a
corresponding divergence in Price. Similarly I am also not sure about which
troughs can be validly connected and checked for divergence.

This query may look silly, but I have been suffering from this doubt ever since
I started studying the divergences more seriously than before.

I hope you will post a few lines on this..

 

[Smart_trade]

Dear ST,

Here is a sample 8,3,4 stoch chart (MINIFTY-1 of 11.11.2011).

I have marked the peaks from 1 to 11 and also marked the troughs from A to J.

Now, if I draw a line from Peak-5 to Peak-6 and check for divergence in Price
during that period, such a check looks to be a valid check.

But, if I draw a line from Peak-3 to Peak-4 and check for divergence in Price during
that period, it somehow appears to be an invalid check - but I am not sure.

I am unsure about which peaks are valid for connecting and checking for a
corresponding divergence in Price. Similarly I am also not sure about which
troughs can be validly connected and checked for divergence.

This query may look silly, but I have been suffering from this doubt ever since
I started studying the divergences more seriously than before.

I hope you will post a few lines on this..

Dear Murthy,

1) Divergence is to be checked in two/three tops /bottoms......so the precondition is there has to be a top which loos like a top....tops 2,3,4 can hardly be called as tops...they are small rallies. But 6 and 7 are proper tops where you can see divergence if any...

2) When we check two tops for divergence, it is necessary that the oscillator has not dipped below the oversold zone in between these two tops...if it is so....then we have to see next two tops....

Smart_trade

 

[murthyavr]

Dear ST,

Thanks for your prompt clarification.

I am posting today's MINIFTY chart here.

If you notice the line on the oscillator, the second trough is not actually a trough
in the strict sense, but this divergence gave about 40 points.

Now:

1. Is this an exception ?

2. Or, is it because of the hook made by %K on %D?
(You promised sometime back on this HOOK method, and I hope you will find
some time for that.. )

Thanks,

 

[Smart_trade]

Dear ST,

Thanks for your prompt clarification.

I am posting today's MINIFTY chart here.

If you notice the line on the oscillator, the second trough is not actually a trough
in the strict sense, but this divergence gave about 40 points.

Now:

1. Is this an exception ?

2. Or, is it because of the hook made by %K on %D?
(You promised sometime back on this HOOK method, and I hope you will find
some time for that.. )

Thanks,

See the bottoms on price chart ...they look proper bottoms the second bottom slightly lower than the first...and then see the oscillator which is showing rising bottoms....this case is a case of positive divergence.....it is also a hook which indicated an upmove ...

Smart_trade

 

[timepass]

(You promised sometime back on this HOOK method, and I hope you will find
some time for that.. )

Thanks,

I second that request. I still don't know what is a hook, far less how to interpret it

 

[EagleOne]

Murthy, the following old posts might remind you of some early lessons by ST on hidden divergence.

In the above chart, stoch is making higher low and price making lower low.Is it indicating a divergence? and does it mean price will pull up?

It is a positive divergence, it means the market will rally ( go up )

Smart_trade