Stochastic Oscillator, the beginning

Sergey Golubev
Moderator
120301
Sergey Golubev  

I tryed to collect everything about one indicator: Stochastic Oscillator.

"Technical Analysis from A to Z":

Overview

Sto.chas.tic (sto kas'tik) adj. 2. Math. designating a process

having an infinite progression of jointly

distributed random variables.

--- Webster's New World Dictionary

The Stochastic Oscillator compares where

a security's price closed relative to its

price range over a given time period.[/CODE]

Interpretation

The Stochastic Oscillator is displayed

as two lines. The main line is called "%K."

The second line, called "%D," is a

moving average of %K. The %K line is

usually displayed as a solid line and

the %D line is usually displayed as

a dotted line.

There are several ways to interpret

a Stochastic Oscillator. Three popular methods include:

Buy when the Oscillator (either %K or %D)

falls below a specific level (e.g., 20) and

then rises above that level. Sell when

the Oscillator rises above a specific level

(e.g., 80) and then falls below that level.

Buy when the %K line rises above

the %D line and sell when the %K line

falls below the %D line.

Look for divergences. For example,

where prices are making a series of new highs

and the Stochastic Oscillator is failing to surpass

its previous highs.

[CODE]Calculation

The Stochastic Oscillator has four variables:

%K Periods.

This is the number of time periods

used in the stochastic calculation.

%K Slowing Periods.

This value controls the internal smoothing of %K.

A value of 1 is considered a fast stochastic;

a value of 3 is considered a slow stochastic.

%D Periods.

This is the number of time periods used

when calculating a moving average of %K.

The moving average is called "%D" and is

usually displayed as a dotted line on

top of %K.

%D Method.

The method (i.e., Exponential,

Simple, Time Series, Triangular, Variable,

or Weighted) that is used to calculate %D.

The formula for %K is:

For example, to calculate a 10-day %K,

first find the security's highest-high and

lowest-low over the last 10 days.

As an example, let's assume that during

the last 10 days the highest-high was 46 and

the lowest-low was 38--a range of 8 points.

If today's closing price was 41,

%K would be calculated as:

The 37.5% in this example shows

that today's close was at the level of 37.5%

relative to the security's trading range over

the last 10 days. If today's close was 42,

the Stochastic Oscillator would be 50%.

This would mean that that the security

closed today at 50%, or the mid-point,

of its 10-day trading range.

The above example used a

%K Slowing Period of 1-day (no slowing).

If you use a value greater than one,

you average the highest-high and

the lowest-low over the number of

%K Slowing Periods before performing

the division.

A moving average of %K is then

calculated using the number of time

periods specified in the %D Periods.

This moving average is called %D.

The Stochastic Oscillator always ranges between 0% and 100%. A reading of 0% shows that the security's close was the lowest price that the security has traded during the preceding x-time periods. A reading of 100% shows that the security's close was the highest price that the security has traded during the preceding x-time periods.
Files:
Bob Davids
1982
Bob Davids  

Thanks newdigital. Been looking at this for decads. A very complete summary for me. Again, big thank you for you.

Regards

David

newt
173
newt  

thanks alot

[Deleted]  

I have got this picture from another topic:https://www.mql5.com/en/forum/177227, it is called TTM Stochastic and it looks very smooth and intersting.Does anybody have the formula of TTM Stoch indicator?

Shot at 2007-07-02

et_phonehome_2
1389
et_phonehome_2  

ND

Thanks for the nice work. Wish there is something for all indicators....

ET

[Deleted]  

hi mystified, i only have this one. hopely this is what are you looking for.

@ND

thx a lot ND

i think i have seen stoch with fibo line here before.did someone have it.

one more thing. what is the best setting for stoch.

i usualy use 14,3.3 for my stoch setting. does anyone use different setting.

regards

HP

Files:
ttmstoch.mq4 5 kb
prasxz
1259
prasxz  

hi

holy_phoenix:
hi mystified, i only have this one. hopely this is what are you looking for.

@ND

thx a lot ND

i think i have seen stoch with fibo line here before.did someone have it.

one more thing. what is the best setting for stoch.

i usualy use 14,3.3 for my stoch setting. does anyone use different setting.

regards

HP

For me 5,3,3 is the best ..

===================

Forex Indicators Collection

Sergey Golubev
Moderator
120301
Sergey Golubev  
et_phonehome_2:
ND

Thanks for the nice work. Wish there is something for all indicators....

ET

We have Parabolic SAR indicator https://www.mql5.com/en/forum/177358

Momentum indicator https://www.mql5.com/en/forum/176430 and

Divergence https://www.mql5.com/en/forum/175886

It will be more of course.

[Deleted]  
holy_phoenix:
hi mystified, i only have this one. hopely this is what are you looking for.

@ND

thx a lot ND

i think i have seen stoch with fibo line here before.did someone have it.

one more thing. what is the best setting for stoch.

i usualy use 14,3.3 for my stoch setting. does anyone use different setting.

regards

HP

Thanks Holy_Phoenix

I think best settings depens on your grasp of timing.I find 14,3,3 settings quite useful.But then again this setting gives late signals sometimes.This is when I aplly 8,3,3 settings and compare it with 14,3,3 settings.There is no perfect settings really but I find the middle of these two settings quite useful.

FXSamurai
98
FXSamurai  

Below you'll find a chart example of the stochastic settings I use. The first chart is the way I use the settings, the second is the same, but with every stochastic split from the rest.

The basic setting is 8-3-3 (i.e. slow stochastic). As mystified points out, settings like 5-3-3 or 14-3-3 (or 13-3-3) have all their own qualities and possibilities. Personally, I'm most comfortable with 8-3-3 and have developped a whole range of strategies with and around it.

I combine the 8-3-3 stochastic with 3 multiples of it, similarly to using a MTF (Multiple Time Frame) version (if you multiply the basic setting by 2, then for a 30m chart, you get more or less exactly the levels of a 1 hour chart).

These various stochastics I then stack all together in one window, and combine them with other indicators, like CCI, MACD, RSI, DeMarker, etc... There's a whole lot of great signals that you can take from these, and I worked out numerous strategies which I'm trading or forward testing at the moment (too many, and too versatile to mention here - I'll just point out that it's not a matter of simply acting on one standard type of oversold-/bought situation, there's many variations of it, depending on the levels of the various different stochastics and other indicators).

One of the things I found is that the best levels to go by should be fibonacci levels. Interestingly, I recently saw another poster on this forum use these on his charts, the only difference being that I also use the 16.18/83.82 level, for maximum oversold/-bought levels.

Explore and enjoy!

Tragapips
105
Tragapips  

You have done a very good job FX samurai. I applied the stochs to GBP and found very interesting things. Thanks to share with us.