Sunil
03-26-2009, 11:57 PM
Hello everyone,
This is with reference to an Email I received, about the correct settings on the stochastic indicator, and we thought it would be a good reference for everyone.
So, I am putting up the entire contents of the mail, for everyone's reference.
Hello Sunil,
I want to take this opportunity to say how great your sessions at OUFX are - very clear and concise, and thoroughly explained.
You knowledge on fibs and divergence is fantastic - I got nuances I had never heard of before. I love the KISS principle, and have settled on using pretty much what you use for trading - price action with candles, support, resistance,, fibs, trendline and channels. I have tried looking at Elliott wave, but it has never really made sense to me, apart from being aware that the peaks of wave 3 and 5 usually shows divergence. I also tried volume analysis, but that is not very useful on any timeframe above 1 hour in FX.
Which brings me to my question - what settings do you use for your stochastics, and any particular reason? They talk of fast and slow stochastics. I have a preference for longer term trading, as I have a regular daytime job, so I am still formulating a proper trading plan, with trades and targets lasting days (so I don't need to monitor charts from moment to moment, but can use 1hr to daily or even weekly charts for targets, in conjunction with alerts), which I intend to test (recently learned how to properly test with Rob Booker) So far, I have not grasped the various #'s Joe uses (may need more time); what I see OUFX doing is presenting us with various methodolgies to become a successful trader.
Many thanks, and feel free to post the answer in the forum if appropriate. I'm sure many others would love the information.
Best,
Tanya M
Hello Tanya,
Firstly, thank you for the kind words.
If you have gained something extra from these classes, then it makes my efforts worthwhile.
As you rightly said, “Keeping It Simple” is often the key to success in trading. Most new traders tend to concentrate on the indicators and complicate things by adding too many indicators…in the hope that they can anticipate price action.
But, as I have always maintained, all indicators are lagging.
It is price which moves first, which causes the indicator to change…so how can one expect the indicator to predict the price movement??
Now, this does not undermine the value of the indicators, but one must understand the function of the indicator, be aware of its advantages & drawbacks, and then use it for the appropriate setup….which is exactly what our earlier course on “Technical Analysis” covered.
Keeping it simple, means that one should not clutter the charts with too many indicators and one should be able to see the price action clearly, since price always leaves behind clues.
Regarding your question on the stochastic, the ‘slow stochastic’ is the one that is used more often, since the ‘fast stochastic’ is often too volatile and would give false information.
I keep my slow stochastic at a standard setting of (9,5,5) for all time frames.
Now, it is the last 2 values of the (5,5) which are more important. Most charts have a standard setting of (9,3,3), but I have found that the setting of (3,3) often gives too many whipsaws.
We are looking at the indicator for a specific purpose and we need the correct information.
A slow stochastic is calculated in such a way, that it identifies divergences more effectively than other indicators. And a setting of (5,5) gives a clearer picture.
It really does not matter if you use the (9,5,5) or the (14,5,5) but the last 2 values should be (5,5)
And if you are planning to be a longer term trader, these values are much more effective.
Coming to the last point, yes, we are providing the traders with various methodologies which are most effective.
Joe’s methods are amazingly effective, but more than that, we have a passion for providing the traders with genuine and effective methods.
I hope this answers your questions and please let me know if you have any other queries.
Regards,
Sunil.
This is with reference to an Email I received, about the correct settings on the stochastic indicator, and we thought it would be a good reference for everyone.
So, I am putting up the entire contents of the mail, for everyone's reference.
Hello Sunil,
I want to take this opportunity to say how great your sessions at OUFX are - very clear and concise, and thoroughly explained.
You knowledge on fibs and divergence is fantastic - I got nuances I had never heard of before. I love the KISS principle, and have settled on using pretty much what you use for trading - price action with candles, support, resistance,, fibs, trendline and channels. I have tried looking at Elliott wave, but it has never really made sense to me, apart from being aware that the peaks of wave 3 and 5 usually shows divergence. I also tried volume analysis, but that is not very useful on any timeframe above 1 hour in FX.
Which brings me to my question - what settings do you use for your stochastics, and any particular reason? They talk of fast and slow stochastics. I have a preference for longer term trading, as I have a regular daytime job, so I am still formulating a proper trading plan, with trades and targets lasting days (so I don't need to monitor charts from moment to moment, but can use 1hr to daily or even weekly charts for targets, in conjunction with alerts), which I intend to test (recently learned how to properly test with Rob Booker) So far, I have not grasped the various #'s Joe uses (may need more time); what I see OUFX doing is presenting us with various methodolgies to become a successful trader.
Many thanks, and feel free to post the answer in the forum if appropriate. I'm sure many others would love the information.
Best,
Tanya M
Hello Tanya,
Firstly, thank you for the kind words.
If you have gained something extra from these classes, then it makes my efforts worthwhile.
As you rightly said, “Keeping It Simple” is often the key to success in trading. Most new traders tend to concentrate on the indicators and complicate things by adding too many indicators…in the hope that they can anticipate price action.
But, as I have always maintained, all indicators are lagging.
It is price which moves first, which causes the indicator to change…so how can one expect the indicator to predict the price movement??
Now, this does not undermine the value of the indicators, but one must understand the function of the indicator, be aware of its advantages & drawbacks, and then use it for the appropriate setup….which is exactly what our earlier course on “Technical Analysis” covered.
Keeping it simple, means that one should not clutter the charts with too many indicators and one should be able to see the price action clearly, since price always leaves behind clues.
Regarding your question on the stochastic, the ‘slow stochastic’ is the one that is used more often, since the ‘fast stochastic’ is often too volatile and would give false information.
I keep my slow stochastic at a standard setting of (9,5,5) for all time frames.
Now, it is the last 2 values of the (5,5) which are more important. Most charts have a standard setting of (9,3,3), but I have found that the setting of (3,3) often gives too many whipsaws.
We are looking at the indicator for a specific purpose and we need the correct information.
A slow stochastic is calculated in such a way, that it identifies divergences more effectively than other indicators. And a setting of (5,5) gives a clearer picture.
It really does not matter if you use the (9,5,5) or the (14,5,5) but the last 2 values should be (5,5)
And if you are planning to be a longer term trader, these values are much more effective.
Coming to the last point, yes, we are providing the traders with various methodologies which are most effective.
Joe’s methods are amazingly effective, but more than that, we have a passion for providing the traders with genuine and effective methods.
I hope this answers your questions and please let me know if you have any other queries.
Regards,
Sunil.