How to trade with an oscillator

[Raghavacc]

Raghav, my 2 cents on the issue that u have mentioned.
In my view, we got to know our tools better. You current Stochastics setting of 3,8,4, looks at last 8 bars to perform calculation. So if there is any erroeneous data u have in last 8 bars, the result will be faulty. It is like - garbage in, garbage out. Computers don't understand it, but we human being should.
As mentioned by ST, the OS reading that u see, is nothing but garbage output for me. Due to wide gap, the data use in calculation is not reliable. so better to you our judgement in interpreting it.
If you move to higher TF, this effect will get smoothened and you will get clearer picture.

In my view, if this kind of situation (shift from >5bar OB to >5bar OS) on cleaner chart, this shows me shift in momentum. >5 Bar indicates and strength in momentum..and we just need to go with it.

I think, in that case, the setup of >5bar OB should get negated cause that we histroy. Latest setup of >5bar OS should rule now..

Smart_Trade, Hope I am correct in this explanation.

Happy Trading.

AW/ST,

Today again we had a gap down OS>5bars followed by OB> 5 bars. but this time instead of latest the Old one prevailed.

I shorted the break of first consolidation of the morning keeping S/L at high of that consolidation.

Afterwards that big red bar has an extremely high volume. It made me to think and covered 25% @ 50% of that bar and another 25% at 100% of that bar.I always keep 50% for entire day unless S/L is taken out.

Then it looked like it would reverse and also I thought my stops will be taken out. I should say I was extremely lucky. Just by a rupee and odd paisa it missed my S/L.

Then though I was not convinced that It would move downwards significantly the low volume green bars in 30 Minutes gave me some hope. Then negative divergence in 5 Minutes really made my day.I added again 50% at the break of consolidation.I would like to post only unique situations here and will keep posting daily trades in original thread.

Jai ho ST Bro.........

Regards
Raghav

 

[dhanalaxmi]

Smart_trade sir,
nice thread by you. clear explanation of trading using oscillators by posting charts.Still in the process of reading this thread.

thanks,
dhanalaxmi

 

[sadiq]

Hi ST,

Though myself not new to the market but never attempted to understand technical ideas of trading. fortunately happened to see this thread and gone through it and I believe I understood when to short or long the market (say nifty) as per the famous 6 qualifiers expect one think which I need ur help . what the term divergence means ? is it meaning the change in the direction ? from green to red or vise versa? pls be patience and explain.

regards
sadiq

 

[Smart_trade]

Hi ST,

Though myself not new to the market but never attempted to understand technical ideas of trading. fortunately happened to see this thread and gone through it and I believe I understood when to short or long the market (say nifty) as per the famous 6 qualifiers expect one think which I need ur help . what the term divergence means ? is it meaning the change in the direction ? from green to red or vise versa? pls be patience and explain.

regards
sadiq

sadiq,

The divergence means the oscillator and the price are going in opposite direction...so a positive divergence means market has made a lower bottom but the oscillator is making a higher bottom and negative divergence means that the price has made higher top but oscillator is making a lower top... The thread has many examples of divergence shown on the graph..please go through them to udnerstand this very important phenomenon better.

Best wishes, Enjoy....

Smart_trade

 

[gsri]

Trying to post live Trades.
Short in NF at as per method at 4984.

ST da please correct if any mistakes.

Regards
gsri

 

[gsri]

Exiting short trade with 9 points loss at 4993

 

[sadiq]

sadiq,

The divergence means the oscillator and the price are going in opposite direction...so a positive divergence means market has made a lower bottom but the oscillator is making a higher bottom and negative divergence means that the price has made higher top but oscillator is making a lower top... The thread has many examples of divergence shown on the graph..please go through them to udnerstand this very important phenomenon better.

Best wishes, Enjoy....

Smart_trade

ST ,
Thanks. one more small help. can you able to give the web link so that live candlestcik charts can be viewed ?
regards
sadiq

 

[tempest]

Hey ST,

BNF gave a good example how the oscillator can give good calls in this case 5 min TF. Stoc OS> 5 bars and then a flip that failed to reach OB and then an almost 100 point fall thereafter.

Once again thanks for this great thread. The qualifiers are really useful,I use this along with prides dual time frame system, sort of a hybrid version.

Cheers

 

[scplindia]

nice post and very informative

 

[rmdsmile]

I am posting Bank nifty fut 5 min chart of 26-06-09 which is used for day trading.....the top panel is a stochastic oscillator....I have marked 80 and above as overbought zone

The market goes from overbought to oversold and so on so forth in a trading or sideways market environment...so selling in overbought and buying in oversold zone is a good strategy....but somewhere markets start trending and that is where the trouble starts for our oscillator trader.

Observe in the chart that when market stays in overbought region for more than 5 bars ...it is extremely overbought and selling it is incorrect....market needs to dissipate this overbought reading and till then it will blast off on the upside and our oscillator trader will keep on selling in a market which is blasting off ....The correct action here is BUY....not sell...

Smart_trade

Hi
i need Formula to calculate resistance and support levels for short call can u provide me...........