How to trade with an oscillator

ST
for daytrading on 5min(stchtcs) can we consdier data of yesterday as continuation ?
or should we wait for new formation of more than 5 to 6 bars in OB (stchts) on today data ?
As rightly pointed out by EagleOne, for small timeframes of 5 min a small gap in the open which is very normal can introduce lot of noise to the oscillator and it is better to wait for atleast 8-10 bars so that the oscillator normallises. For larger timeframes such as 30 min, 60 min etc....if the gap is not large visual gap,you can consider the chart as continuous.

Here again the trader has to use his experience. If the market has a strong upmove earlier day and opens with a gap he may decide to buy in the first 5 min bar itself if the first bar is a breakout bar breaking out of sideways congession of last few bays on the previous day and the move has just started and the gap is not likely to be an exhaustion gap ....

Better to avoid such complex situations till you have a good control on the method and you can move out fast if proven wrong.....just stick to basics of the method explained in first 10 odd pages initially.....:)

Hope I have not added to the confusion.....:D

Smart_trade
 
Krish
A very intelligent question, I must say. I asked myself the same quite a while ago. And then I observed that 5 min chart is nothing but a record of heat-of-the-moment trading decisions - good for entry and exit during day trade. It is the higher TFs, starting from 60 min, that has any continution validity. Cause 20 point gap up or gap down will throw the 5 -15 min charts' history out of the loop.

Hope it will help you. Of course, I also await ST thoughts on it! :)
Great understanding and explanation EagleOne......:clapping:

ST
 
ST, thank you so much. Would the buys in this chart fall in this second part (the aggressive one) then and in this case we don't really worry where the Stoch is at the point of buy?

The rules for going long are as follows:
1. The oscillator should have gone to oversold zone.
2. Wait for a bar where the oscillator flips...ie comes out of oversold zone and comes in neutral zone....
3. In doing step 1o 2 the oscillator should not have stayed in oversold zone for 5 bars and more
4. Wait for an upclose ( meaning close more than earlier bar's close)
5. Ensure that by that time oscillator does not go very near overbought region
6. Buy when the high of the upclose bar is broken on upside

Please correct me if I am wrong. Thanks.
Yes buy in this chart is on aggressive second part....and the oscillator will always have high reading in this setup.....and oscillator qualifiers will not apply. It is a "quick buy and book profits in next few bars" kind of a trade.or hit and run trade if you may call it.

It is not a low risk buy recommended by the method ( first part or conservative mode )

Trade both modes with proper understanding so as to avoid losses.

ST
 
ST, Would Stoch grazing the 20 line instead of entering OS and getting out meet qualifier no. 1? Please also could you tell me what your thoughts are on using the 1 min chart?
 
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ST, Would Stoch grazing the 20 line instead of entering OS and getting out meet qualifier no. 1? Please also could you tell me what your thoughts are on using the 1 min chart?
Answer to first question is yes....

Answer to 2nd question is for looking for trade setup go for 5/10 min bars...for fine tuning the entry with close stops you can use 1 min chart...but trading on 1 min set up will give too much noise and small moves....

Does not mean that I am against using 1 min charts. I use 1 min charts for the day trading method I trade currently....but I use them when they are in phase with the longer time frame charts.....

Smart_trade
 
Answer to first question is yes....

Answer to 2nd question is for looking for trade setup go for 5/10 min bars...for fine tuning the entry with close stops you can use 1 min chart...but trading on 1 min set up will give too much noise and small moves....

Does not mean that I am against using 1 min charts. I use 1 min charts for the day trading method I trade currently....but I use them when they are in phase with the longer time frame charts.....

Smart_trade

Thanks so much ST. I hope I will be able to complete the ST Trading School course tonight and be ready for the test on Monday :)
 
Thanks so much ST. I hope I will be able to complete the ST Trading School course tonight and be ready for the test on Monday :)
This method I have traded for a long time...actually this thread was started because I saw someone trading oscillators in wrong way.....no trading school etc...just shared some of my experiences in this thread so that the beginners in trading will shorten their learning curve...

Remember that oscillators are tools for sideways markets and they work best in non trending markets....for trending markets you may not get good trades and you have to use trend following methods once market starts trending an whatever timeframe you trade.

Best wishes for your success with this method and also trading overall...:)

Smart_trade
 
ST
(This method I have traded for a long time...)
you have mentioned in the above post.
Now are u trading with any new method ?
if u are trading new methods plz share to us.
:thanx: for showing our learning curve in short way.
 
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