Double Stochastic

Discussion in 'Technical Analysis' started by LeroyB3, Nov 7, 2005.

  1. LeroyB3


    Is the Double Stochastic not the holy grail it appears to be? I'm assuming it is not and that many individuals on this board will explain to me why. Thanks.


  2. The only time I've heard someone call it the holy grail is when one trader debates with another about it because the words Holy Grail in trading is an easy conversation to start a debate about the merits of some method. :cool:

    Just curious if your going to share your method with us of using the double stochastics to come to the assumption it doesn't meet whatever goals you had while using it...


    With that said...

    I have met traders that are profitable when using it while most aren't.

    Thus, a few learn how to use it while most don't.

    If your interested in learning how to use it and some ET members show up and say they have a profitable method in using it...

    Probably a good idea to pm or email that trader for additional details.

    Just remember...there are dozens and dozens of different ways to using the Stochastics or any other indicator.

    Therefore, when someone saids it works and someone else saids it does not work...

    Don't be surprise if they are using stochastics differently which is usually the case.


    Which below is your definition of a Holy Grail ???

    1) It's a profitable method.

    2) It can make you rich beyond your wildest dreams (rarely or never has losses).

  3. How are you constructing it?

    Robert Miner created a Stoch(RSI) that worked pretty well on intermediate swings, though I haven’t looked at it in a long time.
  4. LeroyB3


    The Double Stochastic I'm referring to is not the Stochastic of the RSI...I have not looked into that indicator yet.

    I just used the phrase "Holy Grail" because everyone pretty much knows what that term refers to. To me that term refers to a profitable system. With a profitable system all you need to do is increase the contracts and the $$$ follow...naiive...I know.

    Anyway, I have been playing around with the Double Stochastic (DS) as an oversold indicator and have been rather impressed. It doesn't get every signal correct, but I never thought it would. That's what stops are for.

    I just know that every method placed on ET gets bashed a little. So, I am looking for what I am doing wrong and then hopefully can correct it to make the indicator even better.

    I know most people use the stochastice as a momentum indicator, but maybe they're missing the boat with the DS.


  5. Hi Leroy,'s naive to think all one needs to do is increase their contract size when they have a profitable method.

    Most traders that do such will violate some sort'uv money managment rule which results in large single losses eventhough the winners versus losers ratio stayed the same...

    There's been a few trade journals here at ET to the above fact.

    Then there's the psychological aspect of increasing size because such will cause discipline problems due to the fact that most traders will increase their size long before being mentally prepared to do such...

    There's also been a few trade journals here at ET clearly showing how trade performance decreased when a trader wasn't mentally prepared to up their size eventhough nothing changed in the profitable method.

    Also, you lost me when you first said your impressed with the particular method your using for the indicator as if it you have a particular method of using it that's profitable.

    If your method is not profitable...why would you be impressed with it ???

    Did you meant that your impressed with it via comparing it to your past results of using something else ???

    You then said this...

    The only way that's going to happen if you specifically share your method and post chart examples of recent trade signals.

    Now...when you say double stochastic...

    Are you talking about the stochastics that has a %K and %D lines ???

    Like I said...for ET members to be helpful for you...

    Your going to need to cough up some details to prevent this thread from turning into another indicator bashing thread.

    Simply, lets get to where your trying to go and not run around the bush anymore.

    With that said above...

    If I seem like someone that's picky with words...your initial post gave no indication you were asking for help to find out what your doing wrong.

    I've just seen too many threads here at ET started like this that gets quickly off track into everybody saying it works and/or it doesn't work with no method revealed nor examples.


  6. charts or examples please-------------
  7. What length lookback are you using in the DS? Most times it is useful to use another with a longer length as a filter or use something totally different like a CCI or divergence. If you are using a 8 bar try adding a 32 and or a 56.
  8. >> “Is the Double Stochastic not the holy grail it appears to be?”

    By itself it is not a Holy Grail. It works great on deterministic signals with no noise (i.e., catching bottoms and tops). On noise (real price data) it’s problematic and its performance sucks big time. One can optimize its parameters on say a year of in-sample intraday data and have an equity curve that’s nearly a 45 degree angle. But when you test the next year’s data (out-of-sample) the equity curve is garbage.

    It may be useful for discretionary trades and useful indicator to combine with others. But for mechanical trading my testing indicates that you are going have to do additional work to find a way to profitably use it.

    Here are the equity curves for a double stochastic strategy. The in-sample test is with optimized parameters and the out-of-sample test, which use the optimized parameters from the in-sample optimization. These equity curves are for QQQQ, 5-minute bars, trades held overnight, and include commission and slippage. You can draw your own conclusion about whether the double stochastic strategy is a Holy Grail.

    Note: Just because I’ve haven’t found the double stochastic to be profitable by itself, doesn’t mean that I’m bashing it. I’ve just failed to develop a profitable and robust mechanical trading strategy that uses it. I’m just reporting my results, no offense meant. As I said it may have to be combined with other indicators.
  9. In-sample performance:
    #10     Nov 9, 2005