reading the stochs & demarker

I'm not quite getting how it is that a stoch or demarker indicator can read that a pair is overbought (or oversold, take your pick), and yet the price action continues in the same 'over' direction for another 10, 20, or even 50 pips in some cases.

So then, what's the trick to understanding these indicators?

(No newbies please. I'd like to hear back only from experienced traders.)

Happy holidays to all!

Chance

Lol. Think of that.
What is the basis of your indicator value? The price right?
So the price moves your indicator and not the other way around.

Dude! Having a bad day are we? Thanks for taking the time to reply, but please give me a serious and appropriate response.

I know full well that we're talking about INDICATORS, eg, things that INDICATE. I never implied otherwise.

I asked to be educated, not ridiculed. Your type of reply only makes it that much harder to want to ask more questions later on.

That was not my intention.
For me the key to understanding the Stochastics is not using them in the first place and focusing on Price Action instead.
Your stochastic indicator is an oscillator which means it's pretty much useless in a trending market. If Price drops 1000 Pips it will just go from -1 to 1 and stay there forever making it completely useless.

You must first know what stochastic is and you'll understand it immediately

The %K is (Close - Lowest Low [of period you put as parameter])/(Highest high [idem] - Lowest Low [idem]

So you see that even if the price goes up to a certain level, if it continues going up, stoch will definitely go down.

There is no indicator that can remain on 100% if the price goes higher and higher (unless of course it's a programmed indicator with certain logic as "stay in 100% if price > 1.3")

See how EUR/USD behaved douring MONTHS in the past years, look at a weekly or monthly chart.

It's very interesting (and funny and even addictive) to take an indicator and begin to work with the parameters. However it's important to know the math behind it.
The problem for a lot of us is that since we have thousands of indicators (and we download more every time), we think we can get a magic result if we just align some of them. You may not know the math but you know green and red, and you know when a line crosses zero. That's all it takes to create an addiction

Bigger problem: even funnier (and more addictive) than to do it with one, is to add new parameters and begin thinking "OK, not if the 2 are in green and... no, wait, in "this case" it doesn't work, so let's add a new indicator... OK, now if the 3 of them are in green..."

My advice is: invest your time wisely: take the extra time to play with indicators, but take the important time to study price action.

Back to stochastics, I hope this helps.

Read Tjpld's signature.

I think a lot of people have had good experiences with indicators. However, if you read a lot (FF, books, etc.) you'll see that experienced traders don't use them as the basic get in get out factor.
Of course, you can read William Eckhardt and tell me I'm wrong, and you'll be correct.
However, notice that indicators are based on mathematical calculations.
A lot of people can say "Ok, if first bar is green and this other indicator is going up and...". My son can do that. And people do it constantly, as they buy lottery tickets constantly.
If you want to play with indicators, my advice is "take the time to learn the math".
If you want to make money sooner, my advice is "take the time to study price action, forget about indicators".

Few links you may want to look regarding Stochastics:

http://stockcharts.com/school/doku.p...tic_oscillator

and

http://www.investopedia.com/universi...r/ind_osc8.asp

Take your time in investopedia.com, you'll learn a lot there.