Any intraday system that is dependent on specific parameter values is likely to blow up sooner rather than later. A system using 1 and 3 minute moving average crossovers is trading delayed noise and will never test out profitably. I have never seen a consistently profitable stochastic system, although it is killer in a trading range. I don't want to sound negative but these indicators are not the key to successful trading. Of course, if anyone has valid backtesting data to rebut me I'd be happy to eat crow.
That's the key...to have an intraday system (trade setups, money management, stop/loss management, exit strategy, understanding the strengths and weakness of favorite indicators...etc) not dependent on one thing. I've never met anyone that had a system dependent upon one thing. Also, I've met plenty that have profitable trading systems that uses stochastics but is not dependent upon it. How long does it take to make a profitable trading system valid? Months, Years or Decades? Stochastics along with any other indicator have their strengths and weakness. The key lies in knowing when and when not to use them. Stoc are cool and PPO are cooler. Nihaba Ashi
I would like to see backtesting data that saids stoc or any other indicator will failed when using good money management, stop/loss, etc. In fact, anybody that goes into the market basing their entire trading system on one thing and nothing else...why even bother backtesting it...waste of time. Nihaba Ashi
well, no simple indicator works all the time. it's as simple as that. That's why if you backtest a stoch or a rsi or a macd they will all fail in the long run. it's very easy to test that with any backtesting software. therefore traders using these indicators and only them (even in combination) will either lose or eventually create a style of their own, not following these indicators (and eventually win, but not sure). I am not saying indicators are useless. They are useful, but you don't need them when you know what you are doing. I like to use them as a reminder of direction, trends etc.. but usually my charts have almost no indicators on. trading is about trends (as in dow trends) and most of the time trading ranges. these two things don't need indicators. and, to me, the best is specialist surrogates as don bright calls it. in other words, trade with the specialist instead of trying to predict the market. for futures there are no specialist of course, the game is then what I said : trends and trading ranges. both are much more clear with eminis than stocks (imho). you can use indicators to help you but indicators are always lagging. trends aren't and S/R levels aren't . my 2 cents. tntneo
matrix, Trade with the trend, cut losses, let profits run, understand support and resistance levels, know when to hold them and when to fold them, know how much a winning trade will typically move against you and at what point it likely will not come back, know how to recognize big runner days and set-ups for big multiday moves. I use simple trend identification tools on multiple timeframes, and I trade only in direction of that trend. If there is a conflict stand aside. In the futures, S and R levels are crucial. do you think floor traders are watching 3 minute MA crossovers and 1 minute stochastics? Tick, trin, vix, adv/decl, prem are all useful, standard momentum indicators are less useful because of the many false readings they generate.
Usually I take all my data from the data-logger, and then run it through an algorhythm sequencer. I tell it to look for non-confirmations. Once it identifies a non-confirmation, the data is transferred to an XL spreadsheet, which is programmed to automatically look for correlations between the futures index and cash index, and generate a probability matrix. The matrix template will then display breakdowns on the various positive and negative bogeys. Once I see the bogey on my screen, then I go ahead and call in the trade to my broker, all using 1-minute charts running simultaneously on separate PCs logged into TradeStation, MetaStock, QCharts and PCQuote. Seriously - whatever happened to just trading off support/resistance levels, and letting stops and money-management generate the profits? Everyone has their method, and if it works - more power to you. But IMHO, "entry/exit" is only 25% of the system. The rest is MM.
AAAintheBeltway Just to say - at last someone on here who trades the way i do - i am not alone! I have never back tested anything - as i feel that in the markets, a rule is only a rule, until it is a rule but anwway, two questions to those with experience in back testing - a) how do you allow for liquidity, and b) how do you allow for the the bid / ask
I agree with all participants that said: the trend overall! The trend it's the best friend but you have to recognize soon true or false interruption or breakouts. And only RSI can help you !!! Two words about floor traders: they works better because they makes faster and well positioned in the trasmitting order chain...... More important:they works against you not against their collegues on the floor....... Have a great gain all!