Stochastic however was written in the 1950’s which was an entirely different market than we have today. Nowadays Technical Traders find that Stochastic tends to give a false negative or a false positive signal, just as the stock is beginning a Momentum or Velocity run up with exponential point gain potential. This often frustrates traders who are still using only the older theory of Overbought/Oversold Trend Conditions.
Today with High Frequency Trading Firms HFTs trading stocks in massive order flow on the millisecond scale, Price often appears “Overbought” with the standard Price Oscillators when it is just starting a big run. Often times Overbought Patterns shift to the “Floating Oscillation” Pattern which is a failed signal, due to extreme momentum energy that was not present in the trading environment when these indicators were written. Watch a webinar about Stock Leading Indicators for the Stock Market today.
TechniTrader is "The Gold Standard in Stock Market Education." Go to my TechniTrader.com Learning Center and watch the Leading Indicators for Stocks webinar, to experience for yourself the excellence of TechniTrader education.
Adding a relational center line that trends with the Price Oscillator can reveal patterns in advance of sudden big moves. See the chart example below.
The Floating Center Line has a softer Oscillation, which provides pivotal signals in the Price Patterns. This Hybrid Indicator can be applied to many other Price and Volume based Indicators as well. This Price Oscillator enhanced for the Modern Market provides a more three dimensional and Relational Analysis™ that is needed for the more complex Market Structure of today. Watch a webinar about Relational Analysis.
TechniTrader is "The Gold Standard in Stock Market Education." Go to my TechniTrader.com Learning Center and watch the Relational Analysis webinar, to experience for yourself the excellence of TechniTrader education.
Oscillators can be far more valuable and useful when adaptations and adjustments are made to the older indicators. This gives the Technical Trader more indicator signals, more analysis scope, and further breadth of understanding of Price action. The more a Technical Trader UNDERSTANDS price behavior, the better trading decisions they can make.
Using both Center Line Price Oscillators and Volume Oscillators, enhances and improves the overall indicator analysis for all Trading Styles. Each Trading Style will require modifications to the settings and periods for each Indicator.
The RSI/RSI Indicator shown in the chart example is part of the TechniTrader Indicator Tool Set provided to Students with instructions on how to use it with all the Variables, Combination Indicators, Indicator Settings, and Periods. It is one of the most versatile of all the price indicators, and is a Price Oscillator enhanced for the Modern Market.
Not yet TechniTrader Students can use this theory to design their own Indicators. The ideal Oscillators have one Oscillation Line rather than two.
TechniTrader is "The Gold Standard in Stock Market Education." Go to my TechniTrader.com Learning Center and watch a variety of webinars, to experience for yourself the excellence of TechniTrader education.
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Martha Stokes CMT