How to trade with an oscillator

Re: How to trade with an oscillator Part 2

Anything in technical analysis is based on what the market does most of the time.Thus there will always be exception to any rules.A trader has to understand and accept this fact....this is the reason that all good analysts are not great traders.

In any analysis,price is supreme.So after 5bars or more in overbought region,if the price starts going down and breaks a pivot low, the trader should get out of long position.In 70-80 % time new high will be made but 20-30 % time it will not be made.So as a trader be prepared for that.

After the OB zone,the price retraces in neutral zone and again starts going up and gives 1 or 2 negative divergences.So buy in a neutral zone above a latest bar high...with a stop at low of the bar.

When from OB zone indicator dips in OS zone, the overbought indication gets nullified.

To anticipate weakness we see overlapping bars,small bars not making much progress on the up side...not breaking the high,that should make a trader alert .

Always remember pice is supreme.

Smart_trade
Hi moderator,

golden words , couldn't agree more.
technical does work good for scalping, i don't know about swing trading.

regards
mtftrader
 

rangarajan

Well-Known Member
Re: How to trade with an oscillator Part 2

Anything in technical analysis is based on what the market does most of the time.Thus there will always be exception to any rules.A trader has to understand and accept this fact....this is the reason that all good analysts are not great traders.

In any analysis,price is supreme.So after 5bars or more in overbought region,if the price starts going down and breaks a pivot low, the trader should get out of long position.In 70-80 % time new high will be made but 20-30 % time it will not be made.So as a trader be prepared for that.

After the OB zone,the price retraces in neutral zone and again starts going up and gives 1 or 2 negative divergences.So buy in a neutral zone above a latest bar high...with a stop at low of the bar.

When from OB zone indicator dips in OS zone, the overbought indication gets nullified.

To anticipate weakness we see overlapping bars,small bars not making much progress on the up side...not breaking the high,that should make a trader alert .

Always remember pice is supreme.

Smart_trade
Pl have a look at weekly & daily chart of Smlisuzu NSE

O/S in Weekly, has come out to neutral, but in Dly O/B Five Bars & still.

How will u handle this now, look forward to buy or take the opportunity & short since weekly O/S as one should prefer to go with Higher TF trend.

Or wait & see how it behaves in the coming days where i may lose an opportunity to short at a Higher price assuming the stock goes to o/s in dly
Or rely on vol( above avrage), Macd above zero & signal line, Adx showing strength.

But i am interested in trading exclusively with Stochastic & being an expert on stoch, yr views solicited from that indicator.

Also, pl throw some light on Overlapping bars, small bars - how to trade them
 
Re: How to trade with an oscillator Part 2

Pl have a look at weekly & daily chart of Smlisuzu NSE

O/S in Weekly, has come out to neutral, but in Dly O/B Five Bars & still.

How will u handle this now, look forward to buy or take the opportunity & short since weekly O/S as one should prefer to go with Higher TF trend.

Or wait & see how it behaves in the coming days where i may lose an opportunity to short at a Higher price assuming the stock goes to o/s in dly
Or rely on vol( above avrage), Macd above zero & signal line, Adx showing strength.

But i am interested in trading exclusively with Stochastic & being an expert on stoch, yr views solicited from that indicator.

Also, pl throw some light on Overlapping bars, small bars - how to trade them
I have never traded on weekly bars.Max I have gone is daily bars.So won't be qualified to answer this question.

In daily it is overbought for more than 5 bars so look for 1-2 negative divergences and look to short. But shorting immediately without divergences or without daily bars in OB zone for less than 8-10 bars will be dangerous and likely to give whipsaws.

Smart_trade
 
Re: How to trade with an oscillator Part 2

Hi moderator,

golden words , couldn't agree more.
technical does work good for scalping, i don't know about swing trading.

regards
mtftrader
If you include price action in technicals then I do all my swing trading on price action and it works.

Smart_trade
 
Re: How to trade with an oscillator Part 2

Dear ST,

Thanks for a great thread and ideas in it. You had clearly mentioned that this is not a system - I do tend to use it like a system after PA levels to check for entries. Similarly I use PA triggers for exits when significant previous day levels are crossed, pivot break beyond 21EMA, pivot fails to make HH or LL etc.

Do you need any formal rules for exit? (similar to entries?) or will it be discretionary?

thanks and regards

RB
 

rangarajan

Well-Known Member
Re: How to trade with an oscillator Part 2

Dear ST,

Thanks for a great thread and ideas in it. You had clearly mentioned that this is not a system - I do tend to use it like a system after PA levels to check for entries. Similarly I use PA triggers for exits when significant previous day levels are crossed, pivot break beyond 21EMA, pivot fails to make HH or LL etc.

Do you need any formal rules for exit? (similar to entries?) or will it be discretionary?

thanks and regards

RB
masterjee,

Can u pl elaborate on PA levels u follow & Can u pl post a chart showing yr strategy for entry for easy understanding & you exploit Stochastic in yr trading.

Thanks for yr time.
 
Re: How to trade with an oscillator Part 2

Dear Rangarajan,

I Use previous day H,L,C as levels on 5min chart. ST's osc kicked off near PDL in the morning on 6th bar - so taken. Qualifiers were overridden as I thought PDL more significant.

With ST stochs, looking for a 20-30 points NF in a sideways mkt from levels as above. As I trade options look for 5-10 points in ATM options.

m
 
Re: How to trade with an oscillator Part 2

Dear ST,

Thanks for a great thread and ideas in it. You had clearly mentioned that this is not a system - I do tend to use it like a system after PA levels to check for entries. Similarly I use PA triggers for exits when significant previous day levels are crossed, pivot break beyond 21EMA, pivot fails to make HH or LL etc.

Do you need any formal rules for exit? (similar to entries?) or will it be discretionary?

thanks and regards

RB
Exits and profit taking is discretionary.It is based on earlier supports and resistances,bands etc.

ST
 
Re: How to trade with an oscillator Part 2

Varunji,
How to interpret this divergence?
In divergence wait for both to be in sync again. Either price comes down or OBV goes up to resolve this imbroglio.
In divergence wait for both to be in sync again. Either price comes down or OBV goes up to resolve this imbroglio.

........... so simple, yet so true a statement.

OK, OBV is not really an oscillator, but it can go both below and above zero, and for all practical purposes, the knowledge of this thread is applicable there too.

Here is the link to "How to trade with an oscillator - Part 1"

http://www.traderji.com/day-trading/30182-how-trade-oscillator.html
 
Oscillators such as Stochastics,RSI,ROC are important tools in the hands of a trader trading on technical analysis. But oscillators are generally used in a wrong way and the common reaction of traders is to sell if the oscillator goes into overbought zone and buy once it moves in oversold zone.

The above is too simplistic way of trading with an oscillator....here we will discuss some nonconventional ways.....

Best wishes for the " Oscillating Roller Coaster Journey"

Smart_trade

I was not aware of this information. I found this very useful.
 

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