Which Stochastic settings do you prefer?

[dmedin]

IG web platform defaults to 5 3 3 which I have not seen anywhere else.  (TradingView defaults to 14 3 3 which is what I thought was standard)

Some of the IG analysts use 14 3 5 which baffles me entirely.

Stochastic RSI also baffles me (what is the point?)

Any thoughts are welcome.

(My thought is that 5 3 3 is potentially useful for getting signals more frequently; in which case why would someone invent something like Stochastic RSI?  The idea being that RSI doesn't generate signals frequently enough, which is actually an advantage for the RSI which is better used on daily time frames and when it does give a signal it is more meaningful.  But if you want more signals why not just use a faster stochastic?)

Edited August 5, 2020 by dmedin

[THT]

You're completely missing the point, which most people who look at Indicators do - if you use the default settings you're destined to make mistakes - https://www.amazon.co.uk/Definitive-Guide-Momentum-Indicators/dp/1592803385

This will help the layman, but it doesn't explain how to use Indicators to make money from the markets, I read it once and then binned the book as i wasted a week reading nothing knew.

That is exactly why I blanked out the Indicator settings on some of my charts - because if you knew what they were it would give you one massive leg up to being able to use them properly - seems like i was absolutely spot on blanking out the setting

You do NOT use an Indicator to generate signals - you use them as a filter along with something else which when done correctly gets you into a position within a bar or two of a low/high

If you weren't such a nasty person I might of been open to posting a thread on how to use Indicators to your advantage, but that ain't going to happen

and the StochRSI Indicator has a massive point

[dmedin]

RSI is useful with its default setting (14) on daily charts.

MACD with its defaults is useful in any time frame.

 

[THT]

5 minutes ago, dmedin said:

RSI is useful with its default setting (14) on daily charts.

MACD with its defaults is useful in any time frame.

 

Any Indicator setting is useful it all depends what confirmation you need, doesn't matter about the time-frame - if you're using an Indicator it works best when it is as SPECIFIC as possible for the method

I spent a year full-time in between trades looking at Indicators back in 2010 - All Indicators are mathematical formulas of price action over x periods, they show momentum, we trade price, however, they can be manipulated to show a higher degree of price action direction which increases the odds of success

I've personally not used a default setting of an Indicator for over a decade

Walter Bressert [RIP] created a double smoothed stochastic to use as his preferred Indicator for the type of trading he made money from, that was in the 90's

The StochRSI in its raw form is a wild Indicator, if you smooth it out, it catches a huge % of the markets turns

[THT]

As you can see this StochRSI Indicator did a brilliant job of catching ALL the swing low points and Identifying a new UP cycle - The Green Line is another Stoch RSI setting shown on the same Indicator window as the main StochRSI Ind

The Blue line is a smoothed version of the RAW StochRSI, the Pick line is a moving average of the Blue line

the chart is the Daily SP500 Index

The success in using it comes in the rules for whatever trading method you decide to use/employ - but for Identifying swing lows/highs it's pretty accurate

You can use other Indicators to do this too, hence why I said if you use differing settings to the defaults it can work more in your favour than the markets

Us professional traders aren't professional for cosmetic reasons, its because we do things slightly differently to that of Joe Public, which results in profits - these profits come from a thorough investigation of a method to swing the odds into our favour and not the house/markets

As with any method your risk management will determine just how good it is or not - also knowing in what market conditions the Indicator fails to be effective 

Also you do not need Indicators to make money from the markets - they suit some people not others

Anyone with half a brain can clearly SEE from the chart below that the Indicator is in SYNC with the Rhythm and cycles of the market - yes it LAGS price but only 1-2 bars - That should have been picked up on when i posted my weekly analysis the other month, but it clearly wasn't.

The markets offer you 100's% per year EVERY year in profits, if you are nowhere near those returns then you are not looking at the markets correctly and I'm not saying that you can make those sorts of returns from using an Indicator either