need clarification

Discussion in 'Technical Analysis' started by gopu, Oct 15, 2004.

  1. gopu

    gopu Member

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    Hi All,

    i am basically day trader. i need some clarifications. please respond if you have answers.

    is there any way to predict / follow the trend? which one is best MACD or Stochastic?

    for macd /stochastic what are all the parameters i have to use? i am using MAs 3,13,,26.

    how to analyse those things?

    what is the time frame i have to take for analysing stocks for day trading? like whether i have to 5 or 10 or 15 minute charts?

    these questions may be silly or childish to most of the people here. but i am beginner and i would like to know the details...

    is there any other way to follow the trend or predict the same apart from my doubts?

    thanks in anticipation.

    gopu
     
  2. CreditViolet

    CreditViolet Guest

    Ans 1 There is no way to predict anything.U can follow the trend using simple technical tools llike trendlines,ma,channels or watchout for deterioration in momentum indcators for reversal
    MACD is a lagging indicator.Use it only for confirmation.Stochastic period 18 is a very good day trading indicator

    Ans 2 -5 mins are quite ok.Shorter time frame will make u micromanage ur trades and lead to overtrading.A longer time frame chart can be used for confirmation

    As a trend is happening it is difficult to predict its reversal.The best way to get into a trend early is to look for consolidation patterns.U can then trade a breakout.
    Actually that all about daytrading -TRADING BREAKOUTS since not many moves last long enough.
    The questions u put were very unlike a beginner.Pleasure answering them.
    Regards
     
  3. gopu

    gopu Member

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    Dear Credit,

    thanks for your reply.

    can you tell me how to analyse by using stochastic period. i read in some article, if it goes above 80% sell it, below 20 % buy it.i couldn't understand this.

    for example, 1 minute chart it goes 80% and 5 minute charts it still less than in 20%. how to interpret here. because of this confusion i made huge loss yesterday on one stock.

    also how to put 18 day period in stochastic. i am using sharekhan software. it asks 3 kind of periods.like long term, short term and average period.

    I started this day trading 3 months ago. i think this 3 month is not enough to be called as senior member or otherwise. that's why i called myself as a beginner.

    can you explain for my doubts?

    regards
    gopu
     
  4. CreditViolet

    CreditViolet Guest

    Stochastics should be used only at ur initial entry point.Momentum oscillators go thru wild swings while the price is in a trend.U should have another crieteria to take a positon alongside stochs like a consolidation breakout etc.
    About ur other stochs questions take a look at the technical anaysis sites provided at resources section.If still in doubt ask here with no hesitation.
    Two very close period charts will confuse u.U must predetermine which period will be used for entering positions.
     
  5. CreditViolet

    CreditViolet Guest

    I hope gopu u got the clarifications for ur stochastic questions.Do u want me to elaborate on them
     
  6. gopu

    gopu Member

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    Dear Credit,

    yes, please if you don't mind.

    apart from that, i have some questions/doubts on my mind.

    1.can /should i concentrate on both (MACD and stochastic) or any one.

    i am mostly struggling at turning point(reversal point) and i make lots of loss on that area only. which one is to follow to minimise the loss?

    2.how to interpret the MACD /stochastic?

    3.i am using sharekhan software. what is the parameters i have to use for MACD and stochastic?
    i kept Mas 3,13,26(i got this parameters from this forum only)

    i have this kind of questions. would be great if you could clarify these doubts.

    regards
    gopu
     

  7. Traderji

    Traderji Super Moderator

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    MACD Moving Average Convergence/Divergence

    The MACD ("Moving Average Convergence/Divergence") is a trend following momentum indicator that shows the relationship between two moving averages of prices. The MACD was developed by Gerald Appel, publisher of Systems and Forecasts.

    The MACD is the difference between a 26-day and 12-day exponential moving average. A 9-day exponential moving average, called the "signal" (or "trigger") line is plotted on top of the MACD to show buy/sell opportunities. (Appel specifies exponential moving averages as percentages. Thus, he refers to these three moving averages as 7.5%, 15%, and 20% respectively.)

    Interpretation

    The MACD proves most effective in wide-swinging trading markets. There are three popular ways to use the MACD: crossovers, overbought/oversold conditions, and divergences.

    Crossovers

    The basic MACD trading rule is to sell when the MACD falls below its signal line. Similarly, a buy signal occurs when the MACD rises above its signal line. It is also popular to buy/sell when the MACD goes above/below zero.

    Overbought/Oversold Conditions

    The MACD is also useful as an overbought/oversold indicator. When the shorter moving average pulls away dramatically from the longer moving average (i.e., the MACD rises), it is likely that the security price is overextending and will soon return to more realistic levels. MACD overbought and oversold conditions exist vary from security to security.

    Divergences

    A indication that an end to the current trend may be near occurs when the MACD diverges from the security. A bearish divergence occurs when the MACD is making new lows while prices fail to reach new lows. A bullish divergence occurs when the MACD is making new highs while prices fail to reach new highs. Both of these divergences are most significant when they occur at relatively overbought/oversold levels.

    Calculation

    The MACD is calculated by subtracting the value of a 26-day exponential moving average from a 12-day exponential moving average. A 9-day dotted exponential moving average of the MACD (the "signal" line) is then plotted on top of the MACD.
     
  8. Traderji

    Traderji Super Moderator

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    You should not be using a one minute chart for intra-day trading. I think that is where your problem is. I would suggest you to use a 5 or 10 minute chart.
     
  9. gopu

    gopu Member

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    Dear Traderji and credit,

    thanks for your valuable information i had recived. please advice me what is the time period(parameters) i have to use for MAs, MACDs to pin point the entry point (whether it could be in long or short).

    thanks in anticipation.

    regards
    gopu
     
  10. CreditViolet

    CreditViolet Guest

    Gopu
    I dont know for MAs but for daytrading a period of 12,26,9 is pretty ok.But CHECK for yourself or backtest it on historical data to see if it actually works.
    Remember MACD's are lagging indicators.Use them only for confirmation.
    Actually that goes with all indicators so use them as trend filters not trend signals
     
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