Stochastic secrets

yeah, but it can be a bit tricky if you have an 8 to 10 point spread. At least that's what I've experienced.

Hey Guys,

Good Morning. I try to spend at least 1-2 hours a day researching and tinkering with the charts and numbers. Today I discovered something new for me.

We mentally always want to get as close to the tops and valley floor on the charts when we are trading...right? On the 5 minute charts I usually like to look at the candles one size less than Maximum size so I can see them better. 10 years ago I woke up and I had lost about 60% of my sight overnight so I like the larger candles.

This morning I made the candles as small as they would go and then came up two clicks on the + . While checking out the EUR/USD Chart. I started looking at all the peak tops and valley bottoms about the center of the screen. As I looked more to the right of that area I noticed I could have picked the peaks and valleys of the current candles and maxamized my pip profit.

If a line (say a buy) continued past that point I'd put my cross hairs on, I'd just move it up to the next one peak. Usually when the line came up and hit it - then it would reverse. Then I'd drop the cross hair down to the next lowest valley that was previously on the chart. If the candle went thru that line I looked for the next lowest valley. Sure enough it would hit it and turned back up.

Now on larger time frames I've done this quite a lot trying to find Support and resistance. Never thought much about it for the 5 minute time frame... because of the larger candle size I usually use and because the screen doesn't go back very far.

So by adjusting my candle size as I said above, it's much easier to pick tops and bottoms... on this 5 minute time frame. I bet the EUR/USD will hit 1.3385 or 1.3381 when it turns up... unless we open with a spike up or down.

Again, Not rocket science but I was glad to find that on the smaller candles while using the 5 minute chart. In the past I haven't concerned myself much with support and resistance while trading the 5 miinute time frame.

Anyway, for those who haven't tried that before on the 5 min., give it a try. Just wanted to pass this info on... that's all.

KUDZ - Your right about it being tricky to pick when to get out of a trade as the current candle is coming back on you. Agree 100%. However, after a while you get a feel about it, when to do it on a large candle. Sometimes you win, sometimes you lose but I personally find I win more than I lose. I guess it's just practice.

It's a learning lesson to take some time just to carefully watch how each candle is built. Watching how much each candle normally pulls back on a certain pair you like to trade. Gave me a better idea and understanding of when to jump out.

BiTrader - Played with the 6,2,3 on the 1 Hour chart and it looks pretty good. I'd probably find one Stoch for entry and another for the exits.

Hope you all have a great weekend. Big E

Eelfranz,

Thanks for your ideas, help and support. I've been monitoring your set-up
as it is a lot like mine.

Here is what I'am doing...Please make suggestions!

1). Bollinger Bands set at 18/2.
2). 3ema heavy black line.
(as the 3 ema crosses through the middle of the bollinger band get
ready to go long or short).
3). Yours-- 5ema shift 3 (heavy yellow line).
(the 5ema shift 3 takes a trade 1 or 2 bars before the middle of the
bollinger band).
4). Stoch 12-2-3.
5). Stoch 6-2-3.
6). Stoch 5-3-3.
7). 89ema intermediate trend.
8). I use 25 range bars (sometimes 15 or 20 or 25). I believe a
15 range bar is like a 3 minute chart, a 25 range bar is like a 5 minute
chart and the 20 range bar is like a 4 minute chart. It all depends on
how fast the market is moving.

I trade the mini-dow (YM Market) your system and my bollinger band
system combined seem to be pretty accurate. Your system seems
to be working on other markets which is great!

Would you please screen it up on your computer and tell me what
you think!

Thanks

snarlyjack

P.S. Nice meeting you. I'am impressed with your system and I love
the Stochastic's indicator. We need to get dialed in...

Sorry the Stochastic should be:

1). stoch 25-2-3.
2). stoch 6-2-3.
3). stoch 5-3-3.

Exactly which of these stoch settings are the best one's we should be using
to get really dialed in, I really don't know?

Thanks

snarlyjack

From: Your Trading Coach

Three Losses in a Row


Three losses in a row are tough. That’s about the most consecutive losses that novice traders are psychologically prepared to accept before they feel compelled to take action and ‘correct’ the situation.

If you’re anything but a total newbie, I’m sure you’ll recognize the symptoms:

• Frustration – Why me? I’ve worked so hard. Everyone else in the forum appears to be getting good results with this strategy? Nothing ever works out for me.

• Anger – That strategy developer is a liar and a crook. My broker is running my stops. Someone should be held accountable for this.

• Doubt – What if the strategy doesn’t work? What if I can’t trade? How am I going to support my family?

• Fear – I can’t lose more money, what will everyone say about me when they know I’m a loser? How can I tell my wife/husband that I’ve lost again?

And if that’s not enough, the novice trader will likely be afflicted with the crippling inability to pull the trigger on the next trade, in fear of hitting a fourth loss in a row.

Usually, there is one of two responses:

1) The strategy is tweaked to ensure that the modified version would not have triggered these losing trades, through:
a) Swapping one indicator for another,
b) Optimising indicator parameters, or
c) Adding an additional filter.

or

2) Totally abandoning the strategy, usually followed by returning to their favourite forum to find the next Holy Grail strategy that is designed to make their dreams come true.

Is this the right response though?

Typically, trading decisions which are influenced by emotions rarely result in the right action.

So, what should be done?

First, before we continue, you need to confirm that you do have a valid, proven trading strategy. Have you conducted appropriate testing to satisfy yourself that it provides a positive expectancy? If not, stop trading it right now and return to testing. I don’t care what reason you had for jumping straight into a live trading environment, but the fact is that it’s difficult to psychologically trade a strategy in a consistent and disciplined manner when you don’t have complete confidence in its rules. You need to conduct thorough testing.

But assuming you have a strategy that has proven itself through positive results either in a testing or live trading environment, simply refer to your testing results or past trading history, and you’ll confirm that three losses in a row is a quite normal occurrence. In fact, it’s quite normal to have a lot more than three in a row. And it does not mean that your strategy is flawed.

Let’s look at this from a purely statistical perspective.


(a) Win% = 40%; Probability of seeing at least 3 consecutive losing trades within a 50-trade period = 100% (or so close that it may as well be 100%)

(b) Win% = 50%; Probability of seeing at least 3 consecutive losing trades within a 50-trade period = 99.8%

(c) Win% = 60%; Probability of seeing at least 3 consecutive losing trades within a 50-trade period = 95.8%

(d) Win% = 70%; Probability of seeing at least 3 consecutive losing trades within a 50-trade period = 73.1%

The table above shows that given a trading strategy with a 50% win/loss ratio, the probability that you’ll get a string of three losses in a row somewhere within your next 50 trades is 99.8%.

Even if you’re achieving a win/loss ratio of 70%, you’ve still got a 73.1% chance of having a string of three losses somewhere within your next 50 trades.

It’s going to happen. It’s a normal occurrence. Accept it.

So, based on this, what’s a reasonable response from a trader following three losses in a row?

The first thing is to confirm all three trades were entered and managed in accordance with your plan. You should be doing this for every trade anyway, but if you’re a very short term trader then perhaps you don’t get an opportunity till after the session is over. If that’s the case, and you’ve get three consecutive losses which appear to be worrying you, pause to review them now. If they’re not valid trades, find out why you entered them, refocus on your plan and your goals and then continue trading. However, if they’re valid trades, you might want to consider the following action:

1) If you’re a mechanical trader, keep trading.

2) If you’re a discretionary trader, check to see if each entry is actually at the same setup area. If so, you’re possibly just not reading the market right at the moment. Consider halting your trading until the market action has changed and a new setup has developed.

3) If you still find yourself experiencing difficulty in pulling the trigger, get away from the markets for a while.

a) It’s time to take a break – relax, refresh and recharge yourself.

b) Review your trading plan and your historical results (either live or testing).

c) Carry out some visualisation and affirmation sessions, to prepare yourself for pulling that trigger once your break is over.

d) Return to the markets with the goal of correct application of your plan – don’t focus on the dollars won or lost, instead focus on the process of trading.

4) And if on returning you still find problems, well you’ve got some more serious issues that need to be worked through. I don’t mean that in a bad way, but you need to take a longer break to seriously review both your trading plan and yourself:

a) Are you taking too much risk per position? Reducing your position size can often make an incredible difference in your ability to trade in a relaxed and confident manner.

b) Do you really understand and accept the probabilistic nature of the markets? I’d suspect not. Read “Trading in the Zone” by Mark Douglas for a brilliant insight into these issues.

c) Are you consumed by fear of loss whenever it comes time to enter a trade? What is it you fear exactly? Maybe it’s time to delve into the world of trading psychology. “The Psychology of Trading” and “Enhancing Trader Performance” by Dr Brett Steenbarger would be my recommended starting point.

One final thing! If three losses in a row does not necessarily equate to a flawed strategy, then at what point should you stop trading and review your plan? Well, I don’t base this on a particular number of losses in a row, but rather on a level of drawdown. Only you can determine what should be considered a normal level of drawdown, based on your historical performance. But certainly, if you equal the historical maximum drawdown for your strategy (if not sooner) then you should be reviewing your strategy to confirm it’s based on sound fundamental principles that still apply to the current market environment. And at some stage of drawdown beyond this point, you need to have clearly defined STOP criteria. Don’t bleed your account to death. Stop, take a break if necessary, reassess the situation, conduct further testing and return stronger than ever before.

Happy trading,

Lance Beggs

Hey Guys,

The post above is from YourTradingCoach.com. Always a good read.

One more detail about the ADR Calculator I was asked about the other day. It allows me top easy calculate the Purple Horizontal lines on the chart below. I did not add the extension levels for the candles above and below the existing purple lines which are easy to calculate. Pretty accurate eh? I calculate the lines from the close every friday for next weeks chart. Big E

Red Trader - Sorrty were off subject here. Just trying to be thorough with my answers. Thanks

SnarlyJack,

You wouldn't be related to Bad Bart the blacksmith from post #225 would you? Sorry, with a screen name like yours I couldn't pass on that. Hey, glad to meet you big guy.

Wow. Big order to try and fill. I'm just one of the guys here trying to learn just like everyone else but I appreciate the kind remarks and glad it's helping you in another market. I'm just glad others were willing to take a look at it. I love trading with stochastics.

I set this program up for the forex market and don't know the in's and outs of your market. I put a 50% and 60% Horizontal line on the Stochs. They didn't work too bad for entry but still I had a lot of false signals trying go long when the 3 ema/close crossed the middle of the BB Band. They were terrible trying to predict exits.

Remember the BB Bands were designed to grab your attention at the top or bottom band. When a candle pierces either line look for a possible continuation. Even there you get some false signals. Nothin' is for sure but death and taxes I guess.

My best results always came from the tops and bottoms of the Stochs while using the other indicators mentioned earlier for confirmation or red flags.

Shoot if we had it all figured out it wouldn't be called Trading anymore... just Winning. Wouldn't that be sweet, ha.

Have you tried other indicators, tried changing their numbers to match the results you were looking for? We all need momentum when we trade to make any money... or the candles just sit there doing nothing. How about ema cross overs. I know a lot of traders bad mouth them but I've had some good results in the past. I can hear it now...sorry guys.

You know RedTrader is the Big Dog on this thread. Maybe he could add some suggestions. He's real sharp and savey.

I've been little or no help here and I'm sorry. Look at the chart below at the vertical lines to enter long...pretty shakey.

eelfranz,

Maybe it would be best if we "don't use bollinger bands" and just use
your straight system of:

1). 5ema shift 3.
2). stoch 25-2-3.
3). stoch 5-3-3.
4). 5 minute chart or 25 range bar chart.

I know yours is a good scalping system!

Possible adjustments:

5). 3ema crossing your 5 ema shift 3.
6). 89ema intermediate trend.

Try the possible adjustments and let us know what you think?

Thanks for all your help!

snarlyjack

a hammer to a grown up is a tool

a hammer to a two year old is a head basher

Im using the Double stochastic indicator + Demark trend lines and support and resistance analysis and it seems to work fine when they all match.

Below is the AUDUSD I took on Friday. The trade is still open. I moved the stop forward to lock some profit in but would like to follow it all the way.

I use stochastics 8-3-3 or 14-3-3 the reason is they tend to be more smooth. I use them on the 4 hour and 1 hour and then I sharpen the entry on the 5 or 15 min charts with respect to support and resistance levels and trend lines and demark. Below is the entry made on the 1 hour chart.

hope this helps

dfxclub,

The settings you are using for stochs are working for you and I hope your making bags of pips. Using them on the 5 min chart gives you much better signals than on the 1 & 4 hour for entries like you said.

Please continue to give us updates or any changes you might make. Looks great.

KUDZ - I don't know how you can handle trades with an 8 - 10 pip spreads... not on the lower time frames anyway. I hate giving that kind of money away on any timeframe. I love the GBP/JPY but don't trade it just because of that reason... especially if your trading multiple lots. Too rich for my blood.

Big E

Red Trader ... Did you find you a new girlfriend and left the pack? I'll file a Missing Persons Soon.

I am responding only because of the numerous contacts asking me to do so, hopefully those with foresight and open minds wll benefit from my last post here. Several years I wrote an article that was published in a large trade publication. I looked for that article and was unable to locate it and I believe the trade magazine also is no longer in business. So I will try to condense it here. Basically it went something like this discussing indicators : Indicators are like a stalker following its prey, when the prey moves forward they follow, when the prey moves to the right they follow, and when the prey moves backwards they turn and follow. The main thought here of course is the word " follow". You can change all of the settings, timeframes, and use multiple versions and try all types of indicators, but the fact is, all indicators follow the price bar. They are followers, period. So why do we have this uncontrollable urge to keep looking for that magic one or combinations that will do nothing but display graphs, showing us what just happened in the past and cannot predict the future? Since this has nothing much to do with the concerns of this thread I will stop there. But it did take many years for me to give up this holy grail myth also. On the otherhand I do realize that there is a place in trading for indicators but if they are your over whelming decision making instrument for entering a trade then you will never be able to be constist in your trading.
For me it is a lot more fun to be a winner when trading and I highly prefer catching fish when I go fishing. So let me answer the question, what do I use instead of indicators? Hopefully this will start your thought pattern to some new ideas and lead you down the path to have the ability to make money trading every day, month and year from now on, because it is the basis of what forex trading is really all about.
Forex trading has an unbelievable advantage over future's and equity trading. The advantage is that all forex trading is done in pairs. Example (eur/usd) consists of the eur and the usd. In forex you cannot trade each individually but must be traded in different pairs. Before I explain let me give you an example of where I am going. If you had a wheel barrow of sand to move up a hill 100 feet by yourself it might take you say 5 minutes to do so. But if another person comes along who is a heathly individual to help you, it might now only take 3 minutes. But if that individual got tired and jumped in the wheel barrow, it might be 10 minutes or maybe not able to reach thetop at all if there weight caused you unable to push it.
Now everytime you make a trade to buy or sell the (eur/usd) that is now the wheel barrow, For an example if you buy the eur because it is moving up and the stochastics and all other indicators say now is the moment... so you buy.. But what you don't know is this just one person pushing or two people or has one of them already just jumped to ride the rest of the way at that moment also.
If you are lucky and both people are pushing, then it is going to the top easily and quickly, if only one is pushing it may be slowly and if one is riding maybe not all and may even stop or roll back down the hill.
This is happening every time you make any trade regardless of what any indicator or indicators or settings or timeframes are saying is the right moment to make the trade. So before you take any trade wouldn't you like to now this : is both eur and the usd moving together in the direction of your trade to help you get there sooner and quicker? Because if they are, your stochastis or other indicator is now become that magic indicator or setting or timeframe and you have found you "holy grail" because it worked. When in reality there was no magic or wonderful indicator but the move was happening because of the momentium of one or both parts of the eur/usd.
The bottom line there is special software and data feeds and a few other ways to to determine this before entering a trade.They can break the eur/usd down into each individual part and measure its exact momentium of each part and watch all this in 10tic, 1 min, 5 min, 1 hour, 4 hour or any timeframe that you want to trade in and see when to enter and exit trades at the correct moment that will work every time, day in and out without trying to come up with the magical settings and timeframes to use with lagging indicators that at the best follow the last price bar timeframe.
I hope this answers the nice guy question, how I trade question and why I could now stand seeing unbelievable and unobtainable results being reckless presented in that manner. I also wish you many pips........Forexharry

P.S. If you want to keep chasing butterflies make sure there is no holes in your net.

Eur/usd 10 tic scalping chart
Should open is windows viewer bmp file

ah yes, the heat map

seems to me that the heat map just plots virtually the same info as the stochastics does only in a different graphic display



i still find multiple time frame stochastics to be the most reliable and easiest to use

although I'd be glad for someone to show me differently

Hi all!

I'm back... no need to fill missing persons files

Big E,
using a zoom that offers you the chance to see as much as possible on a single screen, without altering the candles (making them so small that you don’t see the OHLC), it’s a very good choice and that because you have a much more accurate orientation in the “space” of that chart.

10x for the specifications about the psychology of trading it’s a very useful offtopic . I prepare all my students from this perspective too, and that’s why because I reached the conclusion that psychology it’s 70% important, among the 30% of knowledge (I use to say that the “perfect” analyst, without a psychological perspective, it’s nothing).

“Red Trader - Sorrty were off subject here. Just trying to be thorough with my answers. Thanks”. No problem - from time to time are necessary

Snarlyjack,

you asked which of the stoch settings would be the “best”. A first answer that I would gave you it’s that this “best” comes along with a pair - if we have the same setting on two pairs, it is possible that on one to be very good and on the other to be a disaster. So back test . A second answer would be that you could use 6,2,3 because it is giving signals earlier + 25,2,3 or to use 6,2,3 + 5,3,3 (5,3,3 as a filter) + 25,2,3. Regarding the other indis, keep it as simple as possible.

And I do not trust this indicator. De Mark of lushche and more easy-to-use.

Well, what can I say! Give some arguments, some samples.

what can i say??just put the ema and make more experiment it will be fine

Hi everyone! Here's a video from a well-known trader showing how he uses stochs.
http://iepstein.com/iraTV/m_10_17_08.aspx

Very informative video.
Anyone here know which stoch settings he uses? My guess is K%=14 and as for price field, ma method ,I'm not sure, D% could be 3. I'd really like to know.

cheers,
CC

Interesting video Cape. Got a tip from it 10x