Trading Stochastic Indicator - This is strange

Discussion in 'Share Investing Strategies, Theories & Education' started by Frank Manno, 28th Mar, 2019.

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  1. Frank Manno

    Frank Manno Well-Known Member

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    I'm using the stochastic indicator on tradeview.com to check a few stocks but I can't understand something.

    I'm analysing ELO.ASX, but if I change the view of the graph, the Stochastic Indicator result changes.

    In DAY view of the candlesticks, the stochastic indicator shows that the stock is below the 20% range which suggests the stock is oversold. But if I switch the Candelisticks to WEEK view, then the same spot is no longer under 20% and oversold. This can't be right can it?

    If the Indicator shows the momentum below 20% at that given time, then it should be below 20% regardless of what view I view the candlesticks in, right?

    Here are links to the 2 screen shots.. Look at the 26-28 March 2019 range to see what I mean.

    Screen Shot 2019-03-28 at 3.07.29 pm.png

    Screen Shot 2019-03-28 at 3.07.06 pm.png
     
  2. turk

    turk Well-Known Member

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    Look at your time periods, 1 is days the other is weeks.
     
  3. Frank Manno

    Frank Manno Well-Known Member

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    Yeah one is Day view the other is week view. But I can't work out why this is making a difference to what the indicator is indicating.

    in Day view, the indicator is showing me that around the 26th-28th March, ELO was oversold and this to me could be an indication to buy some shares right?

    But then if I switch to Week view, the indicator, for the same days 26th-28th March is showing me that the ELO stock is NOT oversold and to me I would possibly choose to not buy.

    Hence my concern here. Why is it that depending on weather I view the graph in DAY or WEEK view will change the indicator's analysis for that period 26-28th March??

    -Frank
     
  4. Kinnon

    Kinnon Well-Known Member

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    From what I understand the stochastic indicator is a momentum indicator which takes the closing price over a defined period of time.

    So a 1 week candle can look different to a 1 day candle giving a different result.
     
  5. Frank Manno

    Frank Manno Well-Known Member

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    Yes but it's not the candles I'm looking at its the Indicator below. In the 1 day view the stock is oversold.. in the 1 week view the stock is not oversold. How can the view change what the indicator is calculating?

    -Frank
     
  6. Kinnon

    Kinnon Well-Known Member

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    Doesn't the indicator go off what the candles are set to?
     
  7. Frank Manno

    Frank Manno Well-Known Member

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    I don't know, does it? I am new to this mind you.

    But if it goes to what the candles are set to then how am I to interpret the indicators reading?

    If what you are saying is correct then am I suppose to set the candlestick view to the timeframe I want to invest? Eg: If I want to invest for weeks, set the candles to week view and read the indicator that way, and if I want to day trade set it to day view and read the indicator result that way?

    -Frank
     
  8. turk

    turk Well-Known Member

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    You are using a 17 3 3 period indicator, 1 chart is 17 3 3 days the others is 17 3 3 weeks.

    Look at the difference time period at the bottom of the chart.
     
  9. turk

    turk Well-Known Member

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    I hope your not using real money:D:eek:
     
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  10. jprops

    jprops Well-Known Member

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    I have no idea, but it sounds like @Kinnon is saying that the indicator is calculated from the closing price of that period. So would that mean the indicator is only calculated usimg the closing price of each Friday? That could explain a difference. I.e. its not just a different view of the same data, its different (less) data.
     
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  11. Frank Manno

    Frank Manno Well-Known Member

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    Ok let me see if I can guess this..

    In the DAY view, the Indicator is looking back 17,3,3 Days and coming up with a result that shows that the stock is oversold.

    In the WEEK view, the indicator is looking back 17,3,3 Weeks and coming up with a different result? (Which would make sense considering it now has more information)

    Not real money I'm not trading I'm just trying to learn :)


    -Frank
     
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  12. Kinnon

    Kinnon Well-Known Member

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    I am a novice too and what trading I've done I've used 1, 3, 5 and 15 minute candles but I was entering and exiting in a much shorter time period.

    If I was looking at trading over a longer period I would use daily candles (or 12hr) but probably wouldn't go the weekly candles unless you're looking to take a very long term position.

    But as said, I am a noob too with only a bit of experience under my belt.
     
  13. Frank Manno

    Frank Manno Well-Known Member

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    When you say very long term position do you mean more than 3 months? I'm interested in trading anything under 3 months.. So would you suggest 1 day candles for this to read the indicator or 1 week candles?

    I know you're new too so I'm not going to take what you say too seriously, I'm just curious your opinion.


    -Frank
     
  14. Nodrog

    Nodrog Well-Known Member

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    Relying on traditional TA indicators such as above will likely see you get eaten alive in the markets nowadays. Give yourself a fighting chance at least by getting a proper trading education in lesser publicised strategies such as taught by @Alex Straker.
     
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  15. willair

    willair Well-Known Member Premium Member

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    Frank,i think Kinnon would have a very good understanding the way it works from what I read..

    BTW, not advice in any way ,but most day traders I talk to work on a 8 day,12% after all costs return and stick too that plan..Sometimes it works but not in the market we are in,im still working out how to spend the Cba dividends that like magic are in the accounts this morning..
     
  16. Kinnon

    Kinnon Well-Known Member

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    Yeah, more than 3 months.

    I don't think I've ever set it to one week candles before.... I like the detail the shorter time frame candles give then longer time frame for confirmation.

    I also use MACD, Bollinger bands and am more of a stochastic RSI fan.

    If you're into podcasts 'Chat With Traders' by Aaron Fifield is good and Baby Pips is a good online 'course' for those starting out but from memory is concentrates more on forex but does cover a lot of the trading basics.
     
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  17. Frank Manno

    Frank Manno Well-Known Member

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    Yes I was thinking about Alex's course. I might contact him and get some more information on this..

    -Frank
     
  18. Frank Manno

    Frank Manno Well-Known Member

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    Out of interest, which charting/technicals software or website do you use?

    I stumbled on to Tradingview.com .. Seems pretty good except the news / home page is very USA and can't be configured to ASX


    -Frank
     
  19. Nodrog

    Nodrog Well-Known Member

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    I think this would be wise. These traditional indicators a couple of decades ago might have been useful (I was a trader then) but geez nowadays with Algo’s / high frequency traders front running trades etc you don’t want to end up being fed to the sharks.

    Do what you want of course but just my opinion.
     
  20. Zenith Chaos

    Zenith Chaos Well-Known Member

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    What does the stochastic indicator represent?

    Although you might drive faster than the speed limit for an instant in time over a long trip your average trip speed would be below the limit. That analogy may apply here.
     
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