Stochastics

Discussion in 'Technical Analysis' started by shortorlong, Mar 15, 2008.

  1. In working with %D it is important to remember that there is only ONE valid signal. That signal is a divergence between %D and the security with which you are working.

    %D (5,3,3) is a leading indicator. Stochastics compares the closing price of a security to its price range, to predict turning points. That is what it does.
    Stochastics should be charted as a 3-line oscillator to get rid of all this nonsense about fast, slow and super slow. You need at least three things to act on divergence, the best being at a double (or triple) bottom.
    In the appropriate crossover areas, at a cycle bottom.

    1. Divergence
    2. Right hand cross
    3. Crossover area
    4. Cycle bottom

    [​IMG]

    Just run this over the history of whatever security you are trading. You will see the patterns repeat, and learn what to expect when you see them again. The main thing is to use Stochastics as directed by George Lane.

    Your initial sources should be George himself:

    Jake Bernstein: who worked with George to develop the ÒStochastics pop,Ó

    ¥ ^ Hot Stock Market Strategies: 5 Secret InvestmÉ (2005) by Jake Bernstein pg 57 ISBN-10: 1932531254
    ¥ ^ Jake Bernstein's ÒThe Complete Day Trader.

    and traders like:
    John Person: a student of LaneÕs who has taken up the pen on Stochastics.
    ¥ ^ Person, John L (2004) A Complete Guide to Technical Trading Tactics: How to Profit Using Pivot Points, Candlesticks & Other Indicators pg 144-145 ISBN-10: 047158455X

    Would you like to see some of George LaneÕs actual charts?
    This is not the complete story, if you or anyone else is interested email me. And I will email you a copy of one of the books from his classroom. The story here is in the charts.
     
    #341     Dec 1, 2009