right way to use the stoch | Forex Factory

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right way to use the stoch

  • #1
  • First Post: Apr 25, 2007 10:05am Apr 25, 2007 10:05am
people seem to have a lot of questions about the use of the Stoch
so this is the right way to use them
Attached Image (click to enlarge)
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setting 5.3.3
green lines
from top to bottom are 80%, 50%, 20%

http://www.forexfactory.com/attachme...7&d=1177512220

blue area is good to buy
red area is good to sell
yellow is the are of concern
from the point the two stoch lines cross each other
to the point they come out of the "80% or 20% zone"
we really don't know what is going on with the stoch
best to stay out
.. other wise it is fine to trade anyother time with them
  • #2
  • Edited 4:29pm Apr 25, 2007 3:53pm | Edited 4:29pm
To: JJ & others
Yes you can trade in the yellow. But you have to be careful.

The way you trade is always with the higher trend ...I call it cheating
ie. So using the above charts if the 4 hour trend was still strong up
you could with some safty still trade the yellow area up..till it comes out of the yellow
& if the 4 hour stoch was down then you could with some safty (but less) trade down

But till you really get to know Stoch you will never go wrong
just letting it be an area for your charts to reset or what I call reload

TEB
  • #3
  • Apr 25, 2007 6:01pm Apr 25, 2007 6:01pm
hi teb,

what about around this squared areas? how should we react correctly within this period?

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i hope you can guide me on this. thanks.
  • #4
  • Apr 25, 2007 8:28pm Apr 25, 2007 8:28pm
Quoting sepak.orang
hi teb,

what about around this squared areas? how should we react correctly within this period?

Attachment

i hope you can guide me on this. thanks.

look at each cross
Attached Image (click to enlarge)
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look at the arrows
see the the Black line they are the middle of the crosses
& the blue, yellow & red areas all fall in the same places
on each cross- don't make it harder then it is
hope that helps
TEB
  • #5
  • Edited 11:04pm Apr 25, 2007 9:50pm | Edited 11:04pm
Quoting TEB63
look at each cross
Attachment

look at the arrows
see the the Black line they are the middle of the crosses
& the blue, yellow & red areas all fall in the same places
on each cross- don't make it harder then it is
hope that helps
TEB
I guess one problem would be not knowing when it crossed if it was in the middle or not until some time has elapsed. At the moment of teh cross, how can you tell if it is in the middle of the movement or not?
Not trying to make it more complicated than it is, but askin for a clarification.
thank you.
  • #6
  • Apr 25, 2007 11:26pm Apr 25, 2007 11:26pm
hi teb,

can u give more examples on this stochs stuff? and bit of explanation for each examples?
  • #7
  • Apr 25, 2007 11:30pm Apr 25, 2007 11:30pm
Hi, I love stochastics (I use 8, 3, 3 on all time frames but thats no biggie) one of the best uses of stoch is for divergence. Price goes up draw a line to connect the tops. If price is going up and stoch is waving down watch out below.

The same for price going down, connect the bottom of price and the bottom of stoch. If price is going down and stoch is waving up then price should turn.

There are no guarantees in life or forex trading but divergence is as good as it gets and should be traded every time.

Attached is one example from yesterday.
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  • #8
  • Apr 26, 2007 12:39am Apr 26, 2007 12:39am
Another example of divergence, price waving up slightly divergence on stochastics and in this case W's % R.
Attached Image (click to enlarge)
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  • #9
  • Apr 26, 2007 4:27am Apr 26, 2007 4:27am
Quoting Vantage
Hi, I love stochastics (I use 8, 3, 3 on all time frames but thats no biggie) one of the best uses of stoch is for divergence. Price goes up draw a line to connect the tops. If price is going up and stoch is waving down watch out below.

The same for price going down, connect the bottom of price and the bottom of stoch. If price is going down and stoch is waving up then price should turn.

There are no guarantees in life or forex trading but divergence is as good as it gets and should be traded every time.

Attached is one example from yesterday.

Hi

My stoch setting of 5.3.3 is to short a TF to look for the big D (Divergence)
8.3.3 is likely the shortest that is ok.
much ,much better is 15.5.5 -it works better them MACD

good add on thanks

TEB
  • #10
  • Apr 26, 2007 4:31am Apr 26, 2007 4:31am
Quoting Stan
I guess one problem would be not knowing when it crossed if it was in the middle or not until some time has elapsed. At the moment of teh cross, how can you tell if it is in the middle of the movement or not?
Not trying to make it more complicated than it is, but askin for a clarification.
thank you.
the crosses is as soon as you can see it after the two stoch lines cross
esp in the 20-80% zones ...
don't make it hard that is the great thing about the Stochs they are simple
  • #11
  • Edited 5:16am Apr 26, 2007 4:41am | Edited 5:16am
Quoting TEB63
Hi

My stoch setting of 5.3.3 is to short a TF to look for the big D (Divergence)
8.3.3 is likely the shortest that is ok.
much ,much better is 15.5.5 -it works better them MACD

good add on thanks

TEB
Thanks for the 15,5,5 I'll have a look.

One of the other great things about stoch is using in multiple time frames and getting them to line up together in OB or OS areas.
  • #12
  • Apr 26, 2007 4:58am Apr 26, 2007 4:58am
Quoting Vantage
Thanks for the 15,5,5 I'll have a look.

One of the other great things about stoch is using in multiple time frames and getting them to line up together in OB os OS areas.
again on the settings I am using not so good.
I use 14.3.3 for that
but I think you could again use 15.5.5.very well
I am using 5.3.3 for trend & triggers
  • #13
  • Apr 26, 2007 5:18am Apr 26, 2007 5:18am
Hi again
I've had a look at the settings you mentioned and I'll stick to 8,3,3 for me this setting works really well for divergence.

TEB63 I have some charts with divergence on http://www.forexfactory.com/showthread.php?t=25984 if you'd like to have a look.
  • #14
  • Apr 26, 2007 7:53am Apr 26, 2007 7:53am
Quoting Vantage
Hi again
I've had a look at the settings you mentioned and I'll stick to 8,3,3 for me this setting works really well for divergence.

TEB63 I have some charts with divergence on http://www.forexfactory.com/showthread.php?t=25984 if you'd like to have a look.

I think you are right
The best all purpose stoch is the 8.3.3
its the GP of Stochs
TEB
  • #15
  • Apr 27, 2007 9:16am Apr 27, 2007 9:16am
From a trade I had on last night

Attached Image (click to enlarge)
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Chart is 60 mins Eur/Usd
(I traded it on 30 min,4 hour, day )

Stoch: setting 5.3.3 Low/High
green lines on Stoch -from top to bottom are 80%, 50%, 20%

blue area is good to buy
red area is good to sell
yellow is the are of concern
from the point the two stoch lines cross each other
to the point they come out of the "80% or 20% zone"
we really don't know what is going on with the stoch
best to stay out
.. other wise it is fine to trade anyother time with them
TEB
  • #16
  • Edited 1:44pm May 1, 2007 10:03am | Edited 1:44pm
STOCHS of Stochs & Stochs
Diff Stochs for Diff Reasons
the 4 I use

Attached Image (click to enlarge)
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1st. Trigger - closest to price volume - 5.3.3
2nd. General - The GP of Stochs (I don't use this much anymore) - 8.3.3
3rd. Trend & confirming trades- simple & right over 75% of the time - 14.3.3
4th. To look for Divergence "the big D"- Better then MACD or MACD H - 15.5.5

TEB
  • #17
  • May 1, 2007 12:00pm May 1, 2007 12:00pm
Thanks for the extra "tools." Makes things that much easier.
  • #18
  • Last Post: May 19, 2007 3:24pm May 19, 2007 3:24pm
TEB,

Based on you [excellent] discussion I have designed a very profitable strategy!

It is based on Stochastic signals with Floor Traders Pivots. I.e. I allow long Stochastics signals only when the market is above the centre Pivot level, on the next larger time frame.

E.g. if I get long signal on Sto(8,3,3) on 240-min chart, I will allow long signal only if the market is above the centre Pivot level on the Daily chart. Where centre Pivot = (High[previous day] + Low[previous day] + Close[previous day]) / 3.

I have back tested it on 2000 bars with four Majors. The Pivot filter increases back test hit rate by +10% and the profit by ~50%.

Since this is an oscilator-based strategy I used a very tight 0.5-ATR trailing stop.

Cheers, Kris
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