Multi Stoch - expanding upon 'Spud's Stochastic Thread Theory'

You present a symphony of indicators that make beautiful music. Eagerly awaiting next....

It is so refreshing to see a thread here on FF where the OP has actually taken the time to properly backtest and clearly explain the strategy for a change. I especially like the use of pivot points and the daily open as supporting evidence in building a case for trading - I think far too few traders are aware of their value.

Great thread so interesting, just found.
I do not and can not code. I have been using DoubleSmoothedStochastic for some time. It is very good especially if used with two instances overlaid. This 19 stoch thing looks amazing. I am waiting with keen anticipation to compare it with the DSS. Should be better and simpler.
best regards

Apologies thread for not updating the strategy today but have had much personal business to attend to, and still more to go.

Will provide update asap once I have the time; definitely in the next 24 hours more likely sooner depending. Thanks for your patience.

Kirkleaforex

I read spudfyre all threads few times. I still salute him for the work he shared with us but unfortunately work lost in overcrowded post/thread/systems. I am using his system since last two years integrating with my system. Of course i will not share anything as you mentioned in Post#1. Thanks for starting this thread as i will learn more from you and i will follow this thread very closely.

Two years ago, I compiled spudfyre threads for offline reading from his first post to last post (102 pages) that i am sharing here. i hope you don't mind for it.
-AK

like this
I read this 3 times and I think It is completely different from the rest "trading system"
I think that everyone can learn a lot here

I still confused and must much learn by this thread...................

Attached Image (click to enlarge)

Welcome to the thread hesron, I hope we can provide some assistance to you.

I like the indicators you use, in particular the main Stochastic with only the blue and red colours showing. I am using a very colourful indicator as you can see, but the 2 colour option really show the fast moving Stochs as well defined from the slower moving ones.

When I release my indicator people will have the option of creating their own colour scheme to whatever best suits their tastes.

But of course it is far less about colour preferences are far more about pattern recognition, and hopefully we will be able to help you out in that regard! Cheers!

Hello thread...today I will cover re-entries, as there will be the odd occasion when you have exited and then sometime later price continues on and you see there is potential for more pips.

RE-ENTRIES

For a re-entry alert to be valid there needs to be a crossing of K AV over the D signal line again, but this may occur anywhere in the indicator window.

For ease of use, I have broken this down into 2 possible scenarios.

The first covers times when the market is highly volatile and Stochastics are already close to, or inside, an extreme zone. Ordinarily we might be inclined to want to SELL out of an Overbought situation and BUY out of an Oversold, assuming that price momentum is approaching exhaustion when we are at these levels, however it is not uncommon in volatile market movements for price to continue its trajectory for many bars either close to, or beyond these extreme 80/20 levels, criss-crossing above and below the D signal line perhaps many times before a valid exit signal appears.

The second scenario covers other instances where Stochastics are outside of the extreme zones, but there is still a cross of the K AV line and the D signal line.

Let's look at these separately.

1) RE-ENTRY option 1 – (BUY example only – opposite for SELL trade)

One of the regularly recurring behaviours of the multiple Stochastic, and Stochastics in general, is its quirky ability to stay in an extreme zone for many bars whilst the market continues to move in the same direction and not reverse.

So how do we recognise this and code the logic so that an alert can suggest this may be happening? (BUY example only - opposite for SELL)

C1 (K AV < D) AND C2 ((K AV > D) AND (K AV > OBX))

OK, lets break that down.

- C1 (K AV < D)
The previous closed candle data value shows that K AV is below the D signal line;

- C2 ((K AV > D) AND (K AV > OBX))
The current closed candle data value indicates that K AV has closed back ABOVE the D signal line, and has either moved back into the Overbought zone or was already there.

This information suggests a continuation of the bullish trend, and so we can re-enter with a new BUY trade. Then, whilst ever further exit criteria are not met in full, as explained in the EXIT section earlier, we can stay in the BUY and ride it, wave after wave, until there is a definite exit alert presented.

VISUAL ALERTS:

- Vertical line MAGENTA thickness = 3"
- text on screen CAUTION RE-ENTRY IN OVERBOUGHT

RE-ENTRY option 2 (BUY example only opposite for SELL trade)

Sometimes we will exit a trade, (waiting at least one candle for an opposite directional alert), and conditions return back to indicating movement in the original direction, offering us a chance to re-enter the market with a fresh BUY trade.

This generally happens when the K AV group has crossed below the 50 level line, and then crosses back above, and also crosses back above the D signal line. This can occasionally happen fully above the 50 level line, so I have elected to leave all reference to the 50 level line out of the formula, as generally it only requires a cross of K AV below and back above the D signal line.

So, the formula:

C1 (K AV < D) and C2 ((K AV > D) AND (PRICE > BBCL) AND (C1 BBCL > C2 BBCL))

Lets break that down.

1) C1 (K AV < D) and C2 (K AV > D)
If the previous closed candle K AV data value was below the D signal line, and then the current closed candle K AV data value has climbed back ABOVE the D signal line, this is one of the criteria that forms this alert.

2) PRICE > BBCL
If PRICE is still above the Bollinger Band Centre Line after C2, this suggests there is still bullish momentum, and forms another criterion to the alert.

3) C2 BBCL > C1 BBCL
If the current closed candle shows the Bollinger Band Centre Line data value being greater than that of the previous closed candle, this is the final criterion that forms part of this alert. This indicates that the momentum is still bullish, as the Centre Line (LWMA) values are still increasing.

VISUAL ALERTS:

- Vertical line MAGENTA thickness = 2
- text on screen CAUTION - RE-ENTRY

EXIT FROM RE_ENTRY?

Re-entries can be profitable in the extreme, and sometimes they just dont go our way. Thats life! So how do we manage the exit? Quite simply:

C2 BBCL < C1 BBCL

When the current closed candle data value for the Bollinger Band Centre Line is less than that of the previous candle, this indicates a reversal in momentum, and is a simple enough method of exiting.

The reason for this is that while ever the Bollinger Band Centre Line (i.e. 20 period LWMA) is rising, we stay in the trade, as moving averages lag behind price movement.

Conversely, the BBCL can only fall if price falls, and we generally only see the BBCL fall when all other exit conditions are already being met.

So, for the sake of simplicity in an otherwise complicated world, this is a great way to exit what is a potentially risky entry anyway.

VISUAL ALERTS:

- Default is a check sign above candle. BUY = RED / SELL = LIME
- thickness = 3

Suggestion for changing indicator settings if re-entering.

If you receive a re-entry alert and you decide the conditions are right to enter the trade, if you have previously set up certain TP settings (i.e. fixed PIPs / ATR etc) it may be worth turning these off before entering and either trade manually using your own exit strategy, or use the in-built "Opposite signal exit alert" option available in the indicator settings.

Sometimes these re-entry alerts come at volatile situations and the move can produce a nice windfall. For example, if you have set your TP to a Fixed PIP's value of 10 or an ATR value of 15 and the move offered a potential haul of 50pips prior to an exit alert appearing, then utilising the opposite alert exit function would have been a better option.

______________________________________________________________________________________________________________________________

And that is all for today. Please feel free to PM me with any questions if you don't feel you want to post them in the thread. I am always available and happy to assist.

Tomorrow I will start on multiple time frame analysis as a great tool for choosing better entries, and also as a great way of staying in a trade and earning a better return rather than exiting too early. I will add in some screen-shot examples to better illustrate the power of MTF trading with multiple Stochastics. Thanks for your interest!

AN UPDATE REGARDING THE RELEASE OF THE MULTIPLE STOCHASTIC INDICATOR

Some unfortunate news has come from my programmer today which will mean a significant delay in the release date of the indicator. After a computer crash he has lost a significant amount of data, and more than half of the code he had written was corrupted. This represents many days of work.

He has promised to deliver as quickly as he can, however this will mean a substantial delay, and so I apologise to those of you who are keen to get this up and running.

Thanks for your patience and please stay tuned.

Do I understand correctly that the crossing of the stochatics, (and especially the stochatic rope when it forms clearly) of the D-line is important? D is the signal line? (Noobie question apologies - but I just want to confirm that I understand correctly.)

Precisely. D signal line cross is critical.

Welcome Leonie.

Hi Kirk, I took notes of the entries/exits and simplified them into simple points as follows:

Entries:
1. Basic Entry Setup (4 Alerts) >>> post#6
2. Rope Entry Setup (2 Types): Rope Type#1 (1 Alert) & Rope Type#2 (2 Alerts) >>> post#24
3. Re-Entries (2 Types), (1 Alert for each type) >>> post#49

Exits:
1. TP (3 Options) >>> post#26
2. SL (3 Options) >>> post#26
Note: The 3rd Exit Option under SL is an Opposite Signal of a Basic Entry Setup (1 Alert) >>> post#28
3. Exit from Re-Entries (1 alert) >>> post#49

Please correct me if I'm wrong with any of the points.

Now, I have a couple of questions:
1. Wouldn't it be better if the opposite signal falls under the TP options instead of under the SL? Unless an opposite signal could happen immediately after an entry.
2. Regarding the Fixed pips and ATR options, will the indicator auto execute the SL?

Thanks and really appreciate your hard work.

DW

Hey Kirk, these things happen, don't worry about it... Everyone can see the amount of time and effort you have spent on this and I am sure they will fully understand.

Keep the faith,

Shaun

Which stock's D-line should be placed on the charts? (14?)
Thanks

Hey there good to see you in here.

I am using a 12 or an 8...trying out different options. 8 might give me an earlier entry at times but may cause an earlier exit alert also, so 12 is good for me overall.

Hey there, wow you are organised... yep that pretty much sums it all up so far. Thanks, I'm sure that layout will help others also.

Regarding your questions, I think you are right about the TP option. Perhaps having both available and switchable on and off is the best idea. I will ask my programmer to adjust. Shouldn't be much additional work.

With the SL options, I am aware that some traders like to keep their SL hidden, a feature which i have not included in this version. So at this stage it will auto-execute a visible SL.

Thanks. So it shall be; 4 options for TP and 3 options for SL. I'll update the entry/exit summary once you complete the whole strategy

Double-checking: Stoch 12 3 3, method: simple, low/high. Are these the settings you used in your screenshots (and refer to in the post)?
Thank you.

I am pretty sure I misread your question earlier...apologies for any confusion.

Stoch settings are not able to be compared between a standard Stochastic and the new indicator.

While the slowing value is "3", the method "exponential", and the price field "low/high", the K% value is no longer your standard K% as there are 19 of them. So effectively an alert is issued when the value of the "average of K" (K AV line) crosses above the D% signal line (value of 12 or whatever value you choose as the user), as long as the other entry criteria are being met of course.

Using standard settings of, say, 12/3/3 won't produce the same signals as the new indicator will offer you, as the input value for K% is coming from the averaging of 19 individual K% lines.

And of course because the D% line is a derivative of K%, the D% line will look different on your computer screen using my indicator than if you were using the standard Stoch settings. So I am using a "static" value of "12" for the D% signal line, which of course is derived from a 12 period moving average of "K AV" (not a specific K% value). I am using a higher input value for D% as it offers a smoothing technique to the input signal for an alert. A D% value of "8" works nicely also, but sticking to "3" is not reliable for a decent signal IMHO. I encourage people to play around with their own settings of course.

For the initial set-up alert however, (taking a BUY alert as the example) it is the Average of SLOW K (K11 to K19) that needs to cross above the D% signal line to produce this first alert. The reason being that K AV itself may skew the logic, especially when FAST K (the average of K1 to K10) may have already traveled into the overbought zone while SLOW K is still in oversold. If SLOW K has risen above D then we have more evidence of a possible change in momentum. FAST K may well return back to oversold within a few bars otherwise.

See the screen-shot detailing 2 examples in close proximity where FAST K AV has broken away and yet SLOW K AV has lagged behind. Price continued down about 22 pips across this period on the M1 chart. Unless SLOW K AV is rising above D% we have no indication of a change in momentum.

Using a standard Stochastic, whether it was 21/12/3 or 6/3/3, we would have seen a crossover of K% and D% and thought we were getting a signal to buy, which of course would have been false. Having only two Stochastic lines, K and D, is not enough to tell the whole story, whereas an averaging of all 19, with the addition of the FAST and the SLOW averaged groups offers us so much more information, enabling us to more clearly see changes in momentum over time.

Sorry for the ramble - got carried away there! Hope your questions ended up getting answered though...