Daytrading with stochastics

Discussion in 'Technical Analysis' started by larrybf, Sep 4, 2001.

  1. I daytrade the nq futures with stochastics (14,3) as my lead entry indicator. It works well when the market is rangebound but not so well when the market gets"overbought/oversold for an extended period. Is there any other indicator that gives clues regarding the duration time for this "over b/s" period? thanks to all for all the great advice on the site.
  2. You could switch to moving averages, once OB/OS conditions are in and the price keeps trending in either direction.

    Stochastics ( like most oscillator systems ) is only of use in sideways markets.

    Once a real trend has been established , you're better of using trendfollowing indicators, such as MA or Bollinger bands.
    For shortterm, you could use an 8 / 13 period MA crossover system, but keep an eye on your stochastics. Use the slower MA as stop-loss level .

    Also, an MACD system could be of some help, if you rely heavily on those kind of indicators.

    If you want to trade only with with stochastics, use the same setting of periods, but a longer time frame.

    A 14/3 slow Stoch may signal oversold readings on a 3minute chart, while it barely has moved on a 30 minute chart.

    If in doubt, refer to the longer time-frame. Underlying longterm trends are more significant than shortterm trends.

  3. Privateer- Thank you . changing the time is a very simple solution but also a very good one. Maybe one day aaai will be able to answer my own questions so well . thanks again.
  4. Hoyler


    Excellant answer's Privateer - kudos

  5. Dustin


    Larry also check out Directional Movement. It can really help to define trends. Stoch's may indicate a bounce while DM will show that the trend is in tact.
  6. Magna

    Magna Administrator

    Agree with Dustin, ADX is an excellent indicator to show strength of trend. Of course it doesn't show which way the trend is going, but there are many other methods to show that (along with Wilder's +DM and -DM). Unfortunately many charting services don't offer ADX (i.e., TC2000, CyberTrader) but many do.
  7. Dustin


    Actually ADX does show which way the trend is going.

    DI+/DI- and ADX up: Uptrend
    DI+/DI- and ADX down: No Trend
    DI-/DI+ and ADX up: Downtrend
    DI-/DI+ and ADX down: No Trend

    I use this with Stoch's, RSI, and BB's.
  8. Magna

    Magna Administrator


    Actually ADX does show which way the trend is going.

    What I meant is that ADX by itself does not show which way the trend is going, only the strength of the trend. When combined with, say, Directional Movement (Welles Wilder, the creator of ADX, called it +DM and -DM, but many people call it DI+ and DI-) it's fairly easy to determine the direction. And there are many other means to determine the direction, but ADX by itself does not give you that information.
  9. Dustin and Magna: Thank you . Excellent direct advice.Much appreciated.
  10. Dustin


    Yeah I realized after my reply that you may have meant that. Since DI+- is included in my DM indicator I assumed that everyone else has the same thing.
    #10     Sep 4, 2001