Oscillators - Who uses them?

[tech/a]

M/M I just wanted to demonstrate the difference in exit accuracy and use with ATR V Most other oscillators.
By adjusting ATR multiplier factors out even further to 5 longer term trading exits can be placed.
Ofcourse shorter for shorter term trading.

Wins will increase with shorter time frames but % gained will be compromised.
Vice- versa for longer timeframes.

 

[wavepicker]

Stopped using most years ago.

Most traders use a multitude of indicators/oscillators and as mentioned have no idea how to apply them.
RSI,Bollinger M/A's stochastic all are derived from Price.
Open,close high,low,volume and open interest are re arranged in 1000s of forms to read price action.
ALL ARE LAGGING.
Like all analysis they INDICATE.
Application of ANY trade methodology isnt what will make the profit.

ITS NOT WHAT YOU USE BUT HOW YOU USE IT

And that certaintly doesnt mean the literal sense of how to interpret a stochastic for example----!!

Until you understand this youll be forever combining/cross checking/referencing all sorts of analysis in the futile attempt to find.

SOMETHING THAT WORKS

Ask yourself this question.

Why with 1000s of indicators available to EVERYONE ---Fundamental AND technical--do very few trade at a consistent profit?
If it were analysis---any and or all analysis then ALL would be profitable.

I agree with you tech, relying on indicators is like "chasing shadows against a wall"

 

[GreatPig]

Whats the theory behind the ATR stop method tech?

ATR is a measure of the volatility of a stock. By using it as a trailing stop, you're allowing for the volatility, and thus more volatile stocks will have a wider stop to prevent you getting stopped out by typical daily stock movements.

Daryl Guppy uses countback lines for the same thing. While my system works out stops based on a variety of methods, I also display both an ATR stop and a countback stop for comparison purposes, sometimes using the latter at times such as this when I want tighter stops than I know my system uses.

Here are examples of a couple of my current trades, with my system at the top, an ATR stop in the middle (2.5 x ATR(14)), and a countback stop at the bottom. In the first case the ATR stop is tighter than the countback stop, but it's the other way around in the second case.

As for why my system shows a stop line going right through the prices, well it's a bit more complicated than just a simple stop-loss. It's also controlled by MAs, and where it's actually drawn is not that relevant.

Cheers,
GP

 

[Milk Man]

M/M I just wanted to demonstrate the difference in exit accuracy and use with ATR V Most other oscillators.
By adjusting ATR multiplier factors out even further to 5 longer term trading exits can be placed.
Ofcourse shorter for shorter term trading.

Wins will increase with shorter time frames but % gained will be compromised.
Vice- versa for longer timeframes.

OK, I see now. I am familiar with those, I use them in my mechanical strategy. I just havent seen them plotted before.

I thought it might have something to do with decrease in atr indicating compression in prices. Therefore if prices compress there is said to be explosive action brewing; and if they go the wrong way your FUBAR.

 

[tech/a]

Whats the theory behind the ATR stop method tech?

OOps pehaps I missed your questions intent.
GP has answered if thats the case

 

[bullmarket]

Re: Oscillators - Stochastic Indicator

Hi to whoever is reading this

Firstly, Happy New Year to everyone

I was searching for an apprpriate thread to post my understanding of the Stochastic indicator and found this one, rather than start a new thread, as I've seen a lot of people (not in this forum though ) misinterpret, imo, the stochastic indicator. So hopefully it will help someone or someone can point out anything I am missing or misinterpreting

The stochastic is basically a 'change of momentum' type indicator. It shows where the current close is, in percent, relative to the highest high minus the lowest low range of the last X days...eg if in the last 10 trading days a stock traded between 2.00 and 2.20 and the last close was 2.10 then the stochastic would read (2.10-2.00)/(2.20-2.00) = 50%......This value is typically called the %K (or fast line) on the stochastic display. The %D (or slow line) is simply a moving average of the %K line.

Buy/Sell Signals

BUY signals are given when the %K crosses above the %D line and when especially both are coming up from below the 'oversold' line.

SELL signals are given when the %K crosses below the %D line and when especially both are coming down from above the 'overbought' line

But be aware that the stochastic, like all indicators, can give false signals at times and so should not be used on its own but in conjunction with other indicators and/or chart patterns

What I see fairly often is that traders will often call a stock 'overbought' as soon as the stochastic reads above 75 (overbought line) when in reality it only may or may not be actually overbought at that stage. By the nature of how the stochastic is calculated (as shown above) an uptrending share price will consistantly read above 75 shortly after the uptrend has begun.

The chart below shows where the buy/sell signal points from the stochastic occur on the price chart. You can see that at points A1 and A2, where the stoch starts to read above 75, the stochastic then continues to read above 75 for a period of time while the share price continues to rise (and hence the stock is not actually overbought at all during this period) until the sell signal is generated later on. Only then is the share price actually overbought

You can see that traders who called the share price overbought at A1 and A2 and sold out would have missed out on significant profits.

So the moral of the story imo is: The sell signals is given when the %K crosses below the %D and preferably when both are coming down from above the overbought line, and not simply when the %K and %D lines reach 75 from below. The reverse applies for buy signals.

Food for thought and I hope this helps someone.

In this chart I have set %K = 10 days, %D = 5 days

cheers

bullmarket

 

[markrmau]

Just note - the guy who originally came up with the StochOsc clearly stated that it was to used as per TechA's post (look for price/oscillator nonconformance to signal end of the dominant trend).

Speeding up the oscillator, and buy/sell when 30/70 is crossed are more modern variations. Then again, if you get positivie expectancy, who cares?