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----- Original Message -----
From: "Ira Tunik" <irat@xxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Wednesday, May 16, 2001 11:17 AM
Subject: Re: [RT] 5/18 & 5/22 NASDAQ Turning Points
: As far as I am concerned, the stochastic indicator is the only one that
tells
: you where you are now in relation to the cycle you are trading. If set up
: properly it indicates both buying and selling pressure in the markets and
: tells which side of the market to be on. Yes, the lines are a moving
average
: and a moving average of a moving average, but if you use it exponentially
and
: an X,3,3 configuration, your relationship with the last X number of bars
is
: shown and you can tell where the stochastic indicator is going to go next
by
: just looking back and dropping off the first bar of the series. It is not
: only the indicator, but its effect upon price that gives you a
confirmation
: of a trade.
The stochastic does nothing more than marks where the close is in relation
to the highest high and lowest low of the last N bars. How does this
indicator derived from price action have an impact on the prices?
On another note, let's say that the highest high of the last 10 bars is 150
with the lowest low as 50, with the current price/close as 55. Let's say
that on the next bar, the highest high is now 130 with the lowest low still
at 50 and the close remains the same. The stochastic, previously calculated
as 5%, is now 6.25%. Even though the close remains the same, the stochastic
spikes up. Would you initiate a trade even though the prices (close) hasn't
even move?
: It is not a trading system. It should not be used as over
: bought and oversold buy or sell signals and divergences may occur two,
three
: or four times prior to a reversal in direction of price. All are warning
: signals or trade confirmation signals, they are not triggers to initiate a
: trade. If properly used, this indicator can be a great aid, if improperly
: used or fitted, it can cost you a lot of money. Just like anything else
in
: trading, horseshoes, golf, or dancing, the better you are the easier it
: looks. Ira
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