Stochastic secrets

ByRedTraderandcontributors,071008

A.Preamble

B.Quotes
Thepurposeofindicatorsappearstobe
misunderstoodbyacertainclassoftraders.
Anindicatorcomesinhelptoatraderinthe The losers teach you, the winners
nextways: feed you.
Ifweconsiderthefactthataclassic Titus
indicator(Stochastic,RSI,Bollinger
bands,movingaverage,ADXetc.)is
usedbyabigpercentoftheactive
traders,wecanpointtothe If for a song, a certain instrument
conclusionthatallofthem,seeingat will make the song complete, for a
acertaintimeacertainsignal(or trader, an indicator would ennoble the
almostthesamesignal)oftheclassic trading style.
indicatortheyuse,willbetendedto
actinthesameway.Thisistheresult RedTrader
ofthesocalledmasspsychology.So,
anindicator,helpsatraderbyoffering
himatipregardingwhatthemajority
"Stochastic helps you to <<listen>>
seesand,asaresult,istendedtodo;
to the market."
Iftheindicatoriscoupledtoa
Aiyahmarklah
profitablestrategy,itssignal(s)
contributetoamuchbiggercertainty;


Insomestrategiesitoffersabetter
priceoranadvantageousmomentfor
thetradeopening.

P.S.Everyindicatorhasitslimitations.

ifitmovesunder30butnotunder20,
C.Stochasticsettings waittogetover30andthenbuy;
ifitmovesunder20,waittogetover20

andthenbuy(onalowervolatilityits
recommendedtogetover30).
Values Parameters Levels

80
80

K%=3 70 70

MA=simple
D%=2 50
Pricefield= 50
Slowing=3 30
Low/High
20
30

20
(Assumingthatthetrader,respectsthebasic
rulesoftrendtrading).

2.Knottedcrossing(kc)

D.Entrypoints
Characteristics:

1.Classiccrossing(cc) itoccursover(oron)the70or80
level/under(oron)the30or20level;

makesaknot1;
Characteristics: aftertheknot,itreturnsinthe7030(80
20)interval.
itoccursoverthe70or80level/under
the30or20level;
1
hasonlyoneintersection; Knot=aseriesof(usual)3consecutive
aftertheintersection,itreturnsinthe intersections,disposedhorizontallyorangled,
7030(8020)interval. occurringoutsideoronthe3070interval,
intersectionsfromwhichonlythelastisreliable.

Interpretation:
Interpretation:
ifitmovesover70butnotover80,wait
togetunder70andthensell; iftheknotformsabove70butnotover
ifitmovesover80,waittogetunder80 80,waittogetunder70andthensell;
andthensell(onalowervolatilityits iftheknotformsabove80,waittoget
recommendedtogetunder70); under80andthensell;

iftheknotformsunder30butnotunder Interpretation:
20,waittogetover30andthenbuy;
iftheknotformsunder20,waittoget afterthesignaloverthe70levelits
over20andthenbuy. received,then,onabiggertimeframea)
thereshouldhavebeenreceivedaclassic
crossingbuytypesignal(D.1.)orb)the
stochasticshouldbeinthecontinuation
80
status(E.3.);
70
afterthesignalunderthe30levelits
received,then,onabiggertimeframea)
thereshouldhavebeenreceivedaclassic
50
crossingselltypesignal(D.1.)orb)the
stochasticshouldbeinthecontinuation

30 status(E.3.).

20

80

70

3.Reversedcrossingoutsidethe3070
50
interval(outsiderc)

30
Thereversedcrossingdiffersfromtheknotted
20
crossinginthisway:

betweenthefirstandsecond
intersectionthereisafreespace(no Specifications:
otherintersections)thatcorrespondson
forrecommendedclosepointsseeF.
thechartwithatleast2closed
candles/bars.

Characteristics:
4.Reversedcrossinginsidethe3070
occursoverthe70level/underthe30
level; interval(insiderc)
has2intersections;
betweenthefirstandthesecond
ReadfirsttheboldedtextfromD.3.
intersectionthereisfreespace;
thesecondsignalisoppositetothefirst. Characteristics:

occursunderthe70level/overthe30
level;

has2intersections; 5.Powerpeak(pp)
betweenthefirstandthesecond
intersectionthereisfreespace;
thesecondsignalisoppositetothefirst. Characteristics:

consistsof2classiccrossings(asaresult,
occursoverthe70level/underthe30
Interpretation: level);
onaflatoradescendingtrend(whensell
afterthesignalunderthe70levelits
isexpected),thefirstintersectionwillbe
received,then,onabiggertimeframea)
ahigherhighandthesecondintersection
thereshouldhavebeenreceivedaclassic
anewlowerhigh;
crossingbuytypesignal(D.1.)orb)the
stochasticshouldbeinthecontinuation onaflatoraascendingtrend(whenbuy
status(E.3.); isexpected),thefirstintersectionwillbe
alowerlowandthesecondintersectiona
afterthesignaloverthe30levelits
newhigherlow.
received,then,onabiggertimeframea)
thereshouldhavebeenreceivedaclassic
crossingselltypesignal(D.1.)orb)the
stochasticshouldbeinthecontinuation Interpretation:
status(E.3.).
ifonaflatordescendingtrend,itgivesa
ccsignaloverthe70level,buttheprice
remainsinconsolidation,waitforanother
80
ccsignalunderoronthe70leveland
70
thensell;

ifonaflatorascendingtrend,itgivesacc
50
signalunderthe30level,buttheprice
remainsinconsolidation,waitforanother
ccsignaloveroronthe30levelandthen
30 buy.
20
Higher
high
Lower
80
high
Specifications: 70

recommendedifthecorrectionreceiveda
classiccrossingbuttheimpulsedidnt, 50
withthescenariothatstochasticcouldnt
giveaswellaclassiccrossingsignaland
30
reversedcrossedinthe3070area;
Higher
becausetheoutsiderctendstobe low 20
Lower
strongerthantheinsiderc,more low

attentionandagoodmoney
managementarerequired.

6.Divergence 8.Minus

Asmanyotheroscillators,stochasticalsoshows Characteristics:
divergences.
thestochasticlines(%Kand%D)merge,
formingasinglestraightline,whichcan
behorizontalorangled.
7.Arc
Interpretation:

Characteristics: ifitoccursinsidethe3070interval,a)
lookforasignalonalowertimeframeor
outsidethe3070interval,itmakesanarc b)waituntilthelinesunmergeandopen
(alongloopwhichstaysoutsidealong apositioninthatdirection(whichshould
while). bethesameasthedirectionindicated
beforethemerge)otherwisedontopen
anyposition;
ifitoccursoutsidethe3070intervala)if
Interpretation:
youhaveanactiveposition,lockaprofit
onaflatordescendingtrend,afterit andwaittheeventualityofcontinuation
comesunder70,sell; ofthepreviousmoveorb)treatitlikea
onaflatorascendingtrend,afterit cccrossing.
comesover30,buy.

80

80 70

70


50

50

30

30 20

20


Specifications

Thisproceduresrequiresabiggerstop
loss.

E.Waitingmoments Interpretation:

waitforstochastictotouchthe80level,
andafterthatwaitforsignalsspecifiedin
1.Endoflownoise(eln) D.;
waitforstochastictotouchthe20level,
andafterthatwaitforsignalsspecifiedin
Characteristics:
D.;
aperiodwheninthe30level/70level
areamanycontradictorysignalswere
received. 80

70

Interpretation:
50

waituntilstochastictouchesthe50level

andthenyoucana)waitforsignals
30
specifiedinD.orb)ifitcomesfromlevel
20
30,buyandifitcomesfromlevel70,sell.

80

70
2.Continuationstatus

50
Interpretation:

30
assumingthatatleastonetradeisopen
andhasitslockedprofit,astimeasona
20
biggertimeframe,anoppositesignalits
notreceived,thetradershouldwaitfor
thepricetomoveinhis/herfavor.

1.Endofhighnoise(ehn) F.Closingpoints

Characteristics:
1.Theoppositesignal
aperiodwheninsidethe3070area,
manycontradictorysignalswerereceived.
Interpretation:assumingthatatleastonetradeis
openandhasitslockedprofit,afteronabigger

timeframe,anoppositesignalwasreceived,the
tradershouldthinkabouta)readjustingthe Titus

amountoflockedprofitorb)closethetradeand
waitforareversal.
Values Parameters Levels

K%=30 80

MA=simple
D%=4
G.Otherstochasticsettings Pricefield=
Slowing=4 20
Low/High

Titus

Values Parameters Levels

K%=5
Values Parameters Levels
80
MA=simple
D%=3
20 K%=8 80
Pricefield=
Slowing=3 MA=simple
Low/High D%=3

Pricefield=
Slowing=3 20
Low/High

aiyahmarklah
Values Parameters Levels

K%=4 80

MA=simple
D%=2 50

Pricefield=
Slowing=3 20
Low/High

Values Parameters Levels

K%=14 80

MA=simple
D%=3 50

Pricefield=
Slowing=3 20
Low/High

Values Parameters Levels

K%=14 80
MA=simple
D%=4
Pricefield=
Low/High
Slowing=7 20