I believe this setting is used with MACD no histogram so it is just a line. Some traders use it to spot divergences on the 1,3 and 5 minute time frames... It pretty much follows the MACD histogram setting of 12, 26,9 It just depends on whether you want to see a line or a histogram... Sorry I went off-topic from the stochastic question but I felt I needed to anwser this question....
Considering that this 'indicator' can work for so diverse values of its parameters, it is probably as useful as buying at the second bottom or selling at the second top. In fact, if you follow this simple strategy and use some price action patterns to enhance it, you can do at least as well as with stochastics. And I would say, that chances are you would do even better. There are no settings that can be properly 'personalized' for any indicator out there and if this is true then such indicators are utterly subjective. The only thing you can 'personalize' is your belief system. If you believe strongly enough that this set of parameters will work then your chances of success are much greater than if you were a non-believer. And this does not have to be your 'own' set of parameters, all it takes is to make sure that you truly 'own' the belief about this particular set being the right one. As the beauty is always in the eye of the beholder, so are people drawn to different sets of paremeters for the reasons that have nothing to do with any sort of objectivity. None set is better than the other as this discussion seems to demonstrate. It's good though that we do not burn at stake those who do not subscribe to our set of parameters.
Of course they're subjective. Whatever gave you the idea that they're objective? Not everyone who uses a stochastic is required to look only at the last fourteen periods, any more than anyone who uses an MA is required to look only at the 20.
Screw trying to figure out your own STOCH settings at this point...set several STOCH settings up and WATCH them during market action for several weeks. You are new and you do not have the background yet to be designing STOCH settings...learn about their actions first through observations and study. Much of trading is BEHAVIOR, yours and your indicators, so take the time to try different STOCH settings to study their behavior under different market conditions. See how they react in a major trend, see how they act during oscillating price action, and see how they act during tight chop. The BEHAVIOR recognition is the key for your indicators... Chris BTW, I suggested watching a setting at 5,5,2...see what you can observe...you might like it!
YES I AM VERY SURE! I like strange! General Patton once said, "If everyone is thinking the same, someone is not thinking!" Chris
More or less so, but let me reiterate the main point. If 14 is not any better than 5 so what's the point to bother with any number. The answer is this: it really does not matter what number you are using contrary to your belief that one should study this issue and choose it carefuly as you seem to suggest. The stochastics just as its very name suggests is only an indicator, indicating some conditions. You can get the same indication with 5 or 14 and if not this still does not mean anything. You still need an independent confirmation whether the conditions it indicates are right. There are ways to confirm this which at times can be very unique and powerful and at some other times they can at least give you a better filter, but that would take us to the realm of serious knowledge and not pathetic masturbation with some meaningless integers and repeating standard arguments from textbooks.
Clearly you don't know how the stochastic is constructed or how it's used, so there's hardly any point in continuing the dialogue.
Worth reading: http://www.intellitraders.com/chartpatterns/charttemplate.html also http://www.dacharts.com/systems.php for systems using stochastics.. I use 14/3/3 and 39/9/9 as attached..