How to trade with an oscillator
- Thread starter Smart_trade
- Start date
Dan,
Just my two cents..
1. I think the lines were drawn wrongly by oversight. Lows (of Stoch) need to
be compared with the other pair of lows (of price). If the lows of the price for
the same period are connected, yes - there seems to be divergence.
2. The current trend appears to be down.
In the case of a downtrend, please look for negative divergences, and in
the case of an uptrend, look for positive divergences. Otherwise, the effect
of the divergence will be just a little pull-back!
3. In case the trend is going to change to uptrend with this divergence,
make sure that the prices close beyond the last swing high leading to the
bottom. Only in that case, the uptrend is confirmed and one can go long.
You are a senior member over here.. I hope you will take my observations
positively!
Just my two cents..
1. I think the lines were drawn wrongly by oversight. Lows (of Stoch) need to
be compared with the other pair of lows (of price). If the lows of the price for
the same period are connected, yes - there seems to be divergence.
2. The current trend appears to be down.
In the case of a downtrend, please look for negative divergences, and in
the case of an uptrend, look for positive divergences. Otherwise, the effect
of the divergence will be just a little pull-back!
3. In case the trend is going to change to uptrend with this divergence,
make sure that the prices close beyond the last swing high leading to the
bottom. Only in that case, the uptrend is confirmed and one can go long.
You are a senior member over here.. I hope you will take my observations
positively!
No Senior or junior.Learning is important.
But one thing is clear to me.
The more i read here on divergence,the more i am confused.
Previously,with simple Stoch rule of Smart,i use to make some profit,however micro it is.
With divergence analysis,it has become complicated.:annoyed:
Problem in applying & interpreting perhaps.
KISS is better.
But one thing is clear to me.
The more i read here on divergence,the more i am confused.
Previously,with simple Stoch rule of Smart,i use to make some profit,however micro it is.
With divergence analysis,it has become complicated.:annoyed:
Problem in applying & interpreting perhaps.
KISS is better.
Dan,
Just my two cents..
1. I think the lines were drawn wrongly by oversight. Lows (of Stoch) need to
be compared with the other pair of lows (of price). If the lows of the price for
the same period are connected, yes - there seems to be divergence.
2. The current trend appears to be down.
In the case of a downtrend, please look for negative divergences, and in
the case of an uptrend, look for positive divergences. Otherwise, the effect
of the divergence will be just a little pull-back!
3. In case the trend is going to change to uptrend with this divergence,
make sure that the prices close beyond the last swing high leading to the
bottom. Only in that case, the uptrend is confirmed and one can go long.
You are a senior member over here.. I hope you will take my observations
positively!
Just my two cents..
1. I think the lines were drawn wrongly by oversight. Lows (of Stoch) need to
be compared with the other pair of lows (of price). If the lows of the price for
the same period are connected, yes - there seems to be divergence.
2. The current trend appears to be down.
In the case of a downtrend, please look for negative divergences, and in
the case of an uptrend, look for positive divergences. Otherwise, the effect
of the divergence will be just a little pull-back!
3. In case the trend is going to change to uptrend with this divergence,
make sure that the prices close beyond the last swing high leading to the
bottom. Only in that case, the uptrend is confirmed and one can go long.
You are a senior member over here.. I hope you will take my observations
positively!
I not have much experience with divergences. Though it is a good one, but it was not a very effective one. It was the way you explained it.
Market went up from 1.3634 to 1.3670 and then turned south again in the remaining trend.
Thanks for the explanation from your side. Will keep it in mind.
DanPickUp
dear,
never use stocha alone, combine with another one with stocha, then you'll find good use of it. check the image below, iam using since 6 months and found good results...
never use stocha alone, combine with another one with stocha, then you'll find good use of it. check the image below, iam using since 6 months and found good results...
No Senior or junior.Learning is important.
But one thing is clear to me.
The more i read here on divergence,the more i am confused.
Previously,with simple Stoch rule of Smart,i use to make some profit,however micro it is.
With divergence analysis,it has become complicated.:annoyed:
Problem in applying & interpreting perhaps.
KISS is better.
But one thing is clear to me.
The more i read here on divergence,the more i am confused.
Previously,with simple Stoch rule of Smart,i use to make some profit,however micro it is.
With divergence analysis,it has become complicated.:annoyed:
Problem in applying & interpreting perhaps.
KISS is better.
Last edited:
Dan,
The international markets seem to be obliging all the technicals perfectly well!
See this EUR/USD 5 min. chart of today..
There was no need to pull out any other weapon from the technical analysis
skills - just the TRENDLINE was doing the whole job .. !
See the brilliant confirmation of Stoch Divergence at two places marked A and
B in the chart. The prices have gone above MA-21 at these two places, gone
beyond the previous lows - thus causing doubts if the downtrend was about
to end.
In both these places, the negative divergence (marked on the charts) indicated
that the the downtrend has still some more distance to travel and the prices have gone
down subsequently as indicated by the divergence!
The international markets seem to be obliging all the technicals perfectly well!
See this EUR/USD 5 min. chart of today..
There was no need to pull out any other weapon from the technical analysis
skills - just the TRENDLINE was doing the whole job .. !
See the brilliant confirmation of Stoch Divergence at two places marked A and
B in the chart. The prices have gone above MA-21 at these two places, gone
beyond the previous lows - thus causing doubts if the downtrend was about
to end.
In both these places, the negative divergence (marked on the charts) indicated
that the the downtrend has still some more distance to travel and the prices have gone
down subsequently as indicated by the divergence!
Scholastics simply shows where current price is in relation to previous n days. If it is at the extreme of n days then it reads it as extreme overbought. Markets rarely run in a single direction for 7 or more days. That is what default periods are based upon. Divergence also compares previous high to current high on same basis. If u see a run up then a consolidation and a new high in consolidation, u get divergence. But that is not much reliable if u keep on watching divergence as it develops. Many of the divergence will disappear from chart in the next few days as stochastic make a new high/low on breakout from consolidation and trend continuation.
Basically price based indicators are lagging. If u learn to read price action, then u find these indicators are useless. These indicators r developed many years ago and markets have changed a lot now. Dr. George Lane developed it during the 1950s. The rules and structure of the markets changed a lot now. Simple cross over or divergence do not make money in the market. Belive me, if trading is that simple then every one would have made money. See original works of George lane on stochastic. DeMark had a lot of modified and original indicators which are patented by him and later published in his books. Those strategies also not work that great in real markets as u read in the books.
I am not blaming any of these authors or practitioners. If u read between lines of their books, u will realize that their superior market structure understanding was the key in their success.
It is better to study simple methods like Support/Resistance than these indicators and setups.
Basically price based indicators are lagging. If u learn to read price action, then u find these indicators are useless. These indicators r developed many years ago and markets have changed a lot now. Dr. George Lane developed it during the 1950s. The rules and structure of the markets changed a lot now. Simple cross over or divergence do not make money in the market. Belive me, if trading is that simple then every one would have made money. See original works of George lane on stochastic. DeMark had a lot of modified and original indicators which are patented by him and later published in his books. Those strategies also not work that great in real markets as u read in the books.
I am not blaming any of these authors or practitioners. If u read between lines of their books, u will realize that their superior market structure understanding was the key in their success.
It is better to study simple methods like Support/Resistance than these indicators and setups.
How do you trade Gap Ups? Or we don't trade till 10AM when there is a Gap Up/Down?
Attached is the Nifty Chart for Y'day. How would this been traded?
Also, I see 2 Divergences here(1 & 2). Is my observation correct?
View attachment 17241
Attached is the Nifty Chart for Y'day. How would this been traded?
Also, I see 2 Divergences here(1 & 2). Is my observation correct?
View attachment 17241
Last edited:
I have printed this thread as well as raaaghavs thread and use a combination of both.
Basically the idea behing a gap up or gap down openig is that indicators get chocked up and can show false signals. This works 70percent of time.
also, the stoch is secondary, PRICE is KING.
http://imageshack.us/photo/my-images/43/sendk.png/
also see how nifty broke the support of 5200. agressive traders would have shorted here but i would hae waited for another lower pivot high around 5175 and coveredat 5145. why? A bit less profit but retesting of support of 5200 has been failed here and nifty had more odds of going down.
Baic rules for entry are---
1.if price going up, ask where the next resistance is? it is generally at some reversal candlestick frmation like hanging man, shooting star, doji...etc.
2. whn you reach suchacandlestick, wait for a close of candle below the previous candle.
3. see where the stoch is?
4. by the time the stoch has invariably come out of OB zone in the neutral zone.
5. make sure that stoch is not too close to the OS region.
exceptions--
Smart_Trades 5 bar oscillator rule.
My observation that on major support and resistance levels one has to be extra care ful.
Basically the idea behing a gap up or gap down openig is that indicators get chocked up and can show false signals. This works 70percent of time.
also, the stoch is secondary, PRICE is KING.
http://imageshack.us/photo/my-images/43/sendk.png/
also see how nifty broke the support of 5200. agressive traders would have shorted here but i would hae waited for another lower pivot high around 5175 and coveredat 5145. why? A bit less profit but retesting of support of 5200 has been failed here and nifty had more odds of going down.
Baic rules for entry are---
1.if price going up, ask where the next resistance is? it is generally at some reversal candlestick frmation like hanging man, shooting star, doji...etc.
2. whn you reach suchacandlestick, wait for a close of candle below the previous candle.
3. see where the stoch is?
4. by the time the stoch has invariably come out of OB zone in the neutral zone.
5. make sure that stoch is not too close to the OS region.
exceptions--
Smart_Trades 5 bar oscillator rule.
My observation that on major support and resistance levels one has to be extra care ful.
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