Simplified Version Of (Fast) Stochastic

Here's a write up of Slow and Fast Stochastic in CQG's website:

Fast Stochastics
The 10-bar fast stochastic calculations are as follows:
%K = 100[(C - L10)/(H10 - L10)]
where C = last close and H10 is the highest high in the last 10 bars and L10 is the lowest low in the last 10 bars.

%D is a proxy for a three-period smoothed average of %K.
%D = 100(H3/L3)
where H3 is the three-period sum of (C- L10) over the last three bars and L3 is the three-period sum of (H10-L10) for the last three bars.

The settings are (10,3), which is a 10-bar lookback and a three-period smoothing.

Slow Stochastics
The slow stochastic calculates the fast stochastic %K and %D, but does not plot the original %K; instead, it uses the %D value from the fast stochastic and labels it as %K. The new %D line is a three-period average of the new %K. The settings would be (10,3,3), but only the (3,3) lines are plotted.

See attached chart for a comparison between the two versions.

The original calculation (Slow Stochastic) smoothes the numerator and denominator of the ratio separately, and then divides. The simple algorithm calculates the ratio first, and then smoothes the result.

Original
K:= (MA(Close(@)- LoLevel(@,10),Smo,3)/ MA(HiLevel(@,10)- LoLevel(@,10),Smo,3))*100;
D:= MA((MA(Close(@)- LoLevel(@,10),Smo,3)/MA(HiLevel(@,10)-LoLevel(@,10),Smo,3)),Smo,3)*100;

The simplified algorithm (Fast Stochastic) for a 10-bar slow stochastic is a three-bar moving average of the ((C- L10) / (H10-L10)). Generally, the simplified algorithm is more responsive to price movements.

Simplified
K:= MA(((Close(@)- LoLevel(@,10))/ (HiLevel(@,10)- LoLevel(@,10))),Smo,3)*100;
D:= MA(MA(((Close(@)- LoLevel(@,10))/ (HiLevel(@,10)- LoLevel(@,10))),Smo,3),Smo,3)*100;
Original Algorithm = [Moving Average (Closing Range)]/[Moving Average (Total Range)]

Simplified Algorithm = Moving Average [(Closing Range/Total Range)]
Closing Range = Close – Range Minimum
Total Range = Range Maximum – Range Minimum

My questions are:

1. Does any one knows the settings for Simplified Version to be use on default Stochastic indicator as supplied by MT4?

2. If Yes, please provide the settings. Many thanks.

3. If No, do you need to write a custom indicator for Simplified Version of the Stochastic?

4. If Yes to Point 3, can any one please help to write the Simplified Version (Fast) Stochastic?

Many Thanks and Best Regards,

Victor

Hi Victor,

I don't use Stochastics any more.

However, here's a post I made back in 2007, on the math behind fast and slow stochastics, based on some research I conducted at the time (and wholly dependent on the single information link that I cited).

I can't remember my exact thoughts at the time, but it looks like I assumed that MT4 uses the %K, %D and smoothing factors in the same way that the Stockcharts article describes, as it sounds like these are industry standard definitions. Hence I'd also guess that the "simplified version" is an innovation of CQG's (and would therefore need to be third party-coded in MT4).

For whatever it's worth, here's another post of mine with links to some stochastic threads.

Good luck, I hope that somebody who is familiar with both CQG and MT4 can help you more than I can.

David

David,

Thanks very much for your input and suggestion.

Cheers!