Stock Chart - Stochastic Oscillator
I read about Stochastic Oscillator from a book on day trading stocks. In this book, it recommends Stochastic Oscillator as one of the tools for day trading. This Oscillator can also be used as a tool for short term trading.
Stochastic Oscillator tells us the percentage of the recent close price of a stock against a period of its high/low range. Readings below 20 are considered oversold and readings above 80 are considered overbought. When the oscillator falls below the oversold level and rises back above it, it indicates a buy signal. When the oscillator rises above the overbought level then falls back below it, it indicates a sell signal.
To learn more about Stochastic Oscillator, just do a search for Stochastic Oscillator on Google and you will get tonnes of information. Or simply go to this Stock Charts site which gives a very good explanation.
For my trading now, most of the time I am using this Stochastic Oscillator to look for buy and sell signals for stocks. I prefer to use 25/75 range instead of 20/80 range as it shows a stronger signal. Or the other approach recommended by some gurus is to disregard the first break above/below signal. The second break above/below signal should be a stronger signal to indicate the divergence.
The problem of being too cautious and choose to wait for a stronger signal is that we may lose opportunities as we may be too late to enter position. Well, it is always better to lose opportunities than to lose money!
A challenge for me to overcome is the discipline to follow the rules strictly. There were a few occasions when the down trend was so tempting that I chose to enter postition before the divergence signal. I was caught as the down trend carried on. And the subsequent mistake was that I hurried to contra with a loss without waiting for the up swing. For most of those occasions, I could have waited a few days longer to eventually make a profit! Well, I know I always have to be prepared for a loss once I chose to enter a position, no risk no gain right!
One thing about me is that I am not a day trader, so I do not short sell as that requires us to close a position by the end of the day. Therefore, fewer signals for me as most of the time I am looking for buy signals.
We cannot be right all the time. Hey, if we can get it right 70% of the time, we should be happily making money : )
And if anyone out there have anything to share on this topic, I would really appreciate it if you could give your comments. We would want to be the minority that gains from this stock market!
PS: For some charts for SGX stocks, you can refer to the UOBKayHian site. Remember to use the "Setting " function to change the parameters, and the "Chart" function to turn on the display of the charts.
Link to Stock Wealth blog
Stochastic Oscillator tells us the percentage of the recent close price of a stock against a period of its high/low range. Readings below 20 are considered oversold and readings above 80 are considered overbought. When the oscillator falls below the oversold level and rises back above it, it indicates a buy signal. When the oscillator rises above the overbought level then falls back below it, it indicates a sell signal.
To learn more about Stochastic Oscillator, just do a search for Stochastic Oscillator on Google and you will get tonnes of information. Or simply go to this Stock Charts site which gives a very good explanation.
For my trading now, most of the time I am using this Stochastic Oscillator to look for buy and sell signals for stocks. I prefer to use 25/75 range instead of 20/80 range as it shows a stronger signal. Or the other approach recommended by some gurus is to disregard the first break above/below signal. The second break above/below signal should be a stronger signal to indicate the divergence.
The problem of being too cautious and choose to wait for a stronger signal is that we may lose opportunities as we may be too late to enter position. Well, it is always better to lose opportunities than to lose money!
A challenge for me to overcome is the discipline to follow the rules strictly. There were a few occasions when the down trend was so tempting that I chose to enter postition before the divergence signal. I was caught as the down trend carried on. And the subsequent mistake was that I hurried to contra with a loss without waiting for the up swing. For most of those occasions, I could have waited a few days longer to eventually make a profit! Well, I know I always have to be prepared for a loss once I chose to enter a position, no risk no gain right!
One thing about me is that I am not a day trader, so I do not short sell as that requires us to close a position by the end of the day. Therefore, fewer signals for me as most of the time I am looking for buy signals.
We cannot be right all the time. Hey, if we can get it right 70% of the time, we should be happily making money : )
And if anyone out there have anything to share on this topic, I would really appreciate it if you could give your comments. We would want to be the minority that gains from this stock market!
PS: For some charts for SGX stocks, you can refer to the UOBKayHian site. Remember to use the "Setting " function to change the parameters, and the "Chart" function to turn on the display of the charts.
Link to Stock Wealth blog
posted by fengyu9999 at
1:50 PM
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