Stock Trading Tutorial Trade Slow Stochastic

http://www.guerillastocktrading.com/technical-analysis/use-the-stochastic-osc... Made by George C. Lane in the late 1950s, the Stochastic Oscillator is a momentum guage that tells us the location of the current close compared to the high/low range over a specific number of periods.

George Lane M.D. (1921 to 2004) was a Medical Doctor, stock trader, author, teacher, and technical analyst. He made and popularized the Stochastic Oscillator, which is one of the main indicators used in the present day amongst technical analysts.

Word on the street from an interview with Lane, the Stochastic Oscillator doesn't follow price, it doesn't follow volume or whatever thing like that. It follows the speed or the momentum of price. As a imperative, the momentum changes direction before price. Therefore, the Stochastic Oscillator can be used to detect bullish and bearish divergences to forecast reversals.

I choose to trade the Slow Stochastic for the reason that it's more smoothed out than the Fast Stochastic making for fewer head fakes.

The variation between Fast Stochastics and Slow Stochastics is just a moving average. When calculating Fast Stochastics using the values of 5 and 5, the first 5 is the raw value for Stochastics, while the second 5 is a 5-period moving average of the first 5. When using Slow Stochastics, the first two 5's are the same as with the Fast Stochastics, with the third 5 being a moving average of the second 5. No you are not having an acid flashback, you read that right, a moving average of a moving average. Do not think about that too much.

This slows the movement of the indicator, and so the name of Slow Stochastics. By slowing the movement of the indicator down, we will get a smaller number of signals to buy or sell on the chart, but they should be more dependable signals.

The settings I like to use for the Slow Stochastics depends on the market or stock I am looking at. I always get a laugh out of traders who attempt to use a one size fits all tactic. I say use the power of present day computers and more superior charting tools like Market Club that offer a real time java interface that lets you change the settings in real time. Merely take the slider and tweak the settings so that the signals are smoothed out with less head fakes, and that matches your stock trading style (buy and hold, swing trade, day trade, etc).

In addition keep the kind of Stochastic signal you are looking to either buy or sell as flexible as well. For example, you may discover that the signal line breaking above the 20 line is a good buy indicator, and a good sell indicator is the signal line breaking below the %D line. You may possibly discover that for the market you are trading that a cross of the signal line and the %D line is a better buy signal while a reliable sell signal is when the signal line goes above 80 for a day or two and then breaks under the 80 line. You might find that bullish divergences are better trade signals for specific stocks and markets. For example, go long when the stock price makes a big low but the Stochastic plots a shallower low.

Bear in mind, every stock and market has its own behavior at unique times of the year since that behavior is a mirror image of the combined human psychology of the all the traders who are trading that specific market at a specific time of year. Learn to modify your Stochastic to the market you are trading and to your own trading approach, and watch the profits start to pour in.

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Education

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• trade
• slowstochastic
• stocktrading

[StockTradingMaster]

Good video

[211LEOPEO]

Good Lesson. People blindly use all indicators as they are and they never bother whether it is indicating market correctly. What they don't understand that they have to adjust any indicator they are using in such a way that it reveals a true picture of current market. For different time frame i.e. for 15 minutes charts, 30 minutes chart, 1 hour chart or a Day chart any indicator is to be adjusted according to time frame. Hope your lesson will be usesful for them.

- Leopeo

[Mustafoinc]

Good idea, thanks.