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Free Stochastics Booklet

Source: InformedTrades

Nov 07, 2009

Summary

How to use Divergence with Stochastics

Quote:

Originally Posted by Blaiserboy
(Post 528164)

Describe what you feel to be the correct way.........

Divergence is a warning that a turn is near.

Quote:

Originally Posted by George Lane

In working with %D it is important to remember that there is only ONE valid signal. That signal is a divergence between %D and the security with which you are working.

%D (5,3,3) is a leading indicator. Stochastics compares the closing price of a security to its price range, to predict turning points. That is what it does.

Quote:

Originally Posted by George Lane

A 3-line Stochastics will give you an anticipatory signal in %K, a signal in the turnaround of %D at or before a bottom, and a confirmation of the turnaround in %D-Slow.

Typical values for N are 5, 9, or 14 periods. Smoothing the indicator over 3 periods is standard. Chart it correctly. Run a 5,3,3 next

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