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Steven/
You bring up a point that I've been toying with. I was hoping that one
of the more experienced members would reply, but since they haven't I'll
make my own low grade input. I'm a beginner with a greater investment
in books than securities, so evaluate this accordingly.
The received wisdom is that oscillators work with trading ranges but not
with trends. If this is true then it is more a case of switching
between oscillators and trend-following indicators than of combining
them.
There is a commercial system called Catscan. The developer, Randy
Stuckey, claims that it is two systems in one: one for choppy markets
and one for trends, with a choppiness indicator to switch between them.
Perhaps Stochastics, which tells us where we are now relative to where
we've been, could be used in this way. Once it pegs at one end you're
in a trend. Elder points out that it is easier to distinguish between
trends and trading ranges when you're looking back at a completed chart
than at the "hard right edge" as you try to get a glimpse of the future.
I've tried to make an indicator of my own to show what percentage of the
lookback period has had highs greater than the current high, but ran
into limitations of the MS Indicator Builder. (We need a Visual Basic
add-on). I'll post an accompanying message to see if anyone can help.
For references I'd recommend the following.
Trading for a Living, by Alexander Elder.
Technical Analysis of the Futures Markets, by John Murphy.
Schwager on Futures: Technical Analysis, by Jack Schwager.
Harvey Pearce, Victoria, B.C., Canada
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Steven Buss wrote:
>
> My frustration the last few days led me to try to get a handle on the
> Oscillator (e.g., Stochastic) vs. Trend Following (e.g., moving average)
> indicator issue.
>
> Maybe I've seen someone lay out a general strategy for understanding how
> these two indicator types can be used together and just don't remember...I'm
> sure there are multiple approaches.
>
> But I did come across Alexander Elder's "Double-checking beats optimizing"
> article in a little booklet he sells ("Trader's Guide to Day-Trading") at
> his site for $10. If I had read (and understood <g>) this article just a
> few weeks ago I would have saved myself some tension as well as a few
> dollars...His site is www.elder.com.
>
> Anyone know of anyone else who has specified a clear view of HOW Oscillator
> vs. Trend Following Indicators can be used together?
>
> Steven Buss
> Walnut Creek, CA
> sbuss@xxxxxxxxxxx
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