Combining Indicators

When looking at combing SlowStochastics together 21/10 and 5/3. how do you read them together. this is a very complex question


first and foremost i do not trade indicator signals-in themselves they have no value


so rule number one would be to never trade isolated events


secondly this is a lagging indicator so it is only useful in stacking odds as a confirmation not an anticipatory tool


next indicators have no general merit to me since individual trading object behavior in for example volatility, range, volume and other specs need to be considered so i back test each indicator on the instrument traded and not use it under typical general terms


so you have to find meaningful patterns in the various time frames for your various instruments that show in the past an edge


than i forward test these patterns with paper trading and than when the edge persists i see if it is executable and forward test on small position size


if everything pans out i integrate it in my tool box and create rules with other confirmations and how many are required to use to consider an edge to be isolated and applied


for example:




looking at the sixty minute chart above you see point a and b defining a lower band of a up ward channel(yellow lines) and c and d defining the upper range of that channel


focusing now on the vertical white dotted line we had a prior decline five red bars now stalling at the 200 SMA in purple and the 20 SMA in yellow = some support interpret-able edges


with the price pattern having rejected further lows represented with a hammer candle and a small doji followed a possible directional price reversal is anticipated


once direction, a desire to reload, support and price behavior is identified one might look for confirmation patterns in indicators


if you look at your stochastic example with the indicator on the very bottom showing a slow stochastic in red and a fast one in white you find a pattern i call "the sling", which shows the fast stochastic near the oversold area of 20 or below and the slow stochastic in the overbought area in this case above 80 which i back tested in Gold 60 min charts as an edge above 70 %

with a few more edges identified this might satisfy a trader to take a low risk entry and in this case it paid off, since prices advanced right after the entry(entry being at the white dotted line


(i took this reload trade, financed it at the upper yellow line on the first upleg, took more off on that overshoot of again touching the yellow line and my runner got stopped out at break even entry levels )


if you are now looking to the right dotted vertical line you see a similar setup


following, bottom of channel/yellow line and again sling pattern in the stochastic pair a possible low risk entry point is confirmed by the stochastic



Stay Up-To-Date with New Posts

Search By Tags