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All,
An interesting article by Thom Hartle appeared in the May issue of
Active Trader magazine. In it, he discussed combining the Stochastic
and RSI into one indicator, called the StochRSI. The rationale is
this: oscillators are most effective in non-trending markets because
they oscillate above and below the 30/70 lines where they correspond
to swing highs and lows. However, in trending markets, the
oscillators often shift, skewing to the low side in down markets and
to the upside in up markets. To adjust for that, Chande used the
basic stochastic calculation but plugged in RSI values for the price
values. The result was an oscillator that did not skew as the market
trended. When the StochRSI is used in combination with MACD, which
shows a trend, the result gives apparently much clearer buy and sell
signals. I haven't coded the information into AFL yet, but it seems
quite straightforward. I'm sure Dimitris would be able to do it in 5
minutes! Check out the article "When two oscillators are better than
one" by T. Hartle, Active Trader, vol. 3, no. 5, pp. 48-53.
Al V.
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