Stochastics Experts Anywhere?

Discussion in 'Technical Analysis' started by trainee2006, Aug 30, 2006.

  1. I came across the attached graphic showing two different stochastic tops. Can someone explain the significance and use of these two different formations?

    Also, what is a garbage bottom?

  2. I use stochastics for entertainment purposes mostly on rainy days or if I can not sleep at night.
  3. right hand crossovers are usually sharper. Either due to narrower daily ranges or a big gap in price.

    Garbage Bottoms are false crosses on the bottom side where K%'s above D%. Sometimes in choppy markets you'll see false buy signals like this.
  4. This looks like it came from some of George Lane's teaching materials. As I recall, he preferred the left- hand crossover, where K crosses D before the peak in D. The other situation was considered less reliable. Garbage bottoms are the common situations where stochastics reach an oversold level but cross and recross as price fails to move higher or even goes lower. It is why you cannot use stochastics as a simple OB/OS indicator.
  5. The right-hand crossover is less reliable. Alot of times this big moves retrace.
  6. Stochastics and rsi,macd etc along with lines that are straight, zig zag, etc and show different colors etc are put on charts for one reason and one reason only.

    They are for "SHOW"............:D

    When the new bimbo you met and proposed to last weekend comes over you can show her your system. That should cinch the deal for another weekend warrior marriage find.

    Also when you blow up your account you can keep a printout of the charts and pin up on the wall as proof that all that crap is useless.

    PS.....there is no such thing as an EXPERT in trading, else he/she would have all the marbles.

    Man as hard as i try NOT to post to these ridicules questions it seems i am compelled to make an attempt to save some from themselves............LOTS OF LUCK........OVER and OUT...:p
  7. markets are dynamic, indicators are not - if indicators worked then all you would need is money - you might want to check out price instead... :)

  8. Aren't stochastics a form of price?

    What do you mean by price?
  9. zorrosg


    I have been working with stochastics for a short time, but they do seem to be a valuable indicator. All indicators are based on price, so it is just a different way of presenting the same data, however this different view clarifies the data somewhat compared to looking only ay price charts.
    Compared to some other indicators like macd, moving averages, the stoch is definitely a faster and more sensitive indicator. As recommended by Toni Turner, I prefer to use the slow stochastic with a 14/3 setting. Related to the stoch is the Williams %R, which also gives a useful view of overbought and oversold levels.
    It is always good to use other indicators and price action to confirm any signals generated by stochastics before jumping into a position. Hope this helps.
    Btw, after studying quite a few charts, I must say I haven't some across the right hand crossover at all, almost all are left crossings. However some crossings are almost 'middle' crossings, as they seem to be neither left nor right. I suspect the distinction between left and right crossing is probably not really significant..
  10. If you use stochastics your $$$Cash$$$ goes here...
    #10     Aug 31, 2006