Stochastics Question

[nrgtrader]

Can anyone tell me why these two oscillators appear differently in different software, when the settings are the same (%K=9,%D=3,smooth=3). The software in question uses the following Calculation:


On nth period

Stochastic %D = Avg(Stoch%K(H, L, C, S), n)

Every period thereafter

Stochastic %D = (Previous Stochastic %D * (n-1) + Stoch%K(H, L, C, S)) / n

n = Smoothing periods

Stoch%K represents Stochastic %K
Avg represents Simple Moving Average

[NinjaTrader_Bertrand]

Welcome to our forums - which NT Stochastic are you using? The regular or Fast one?

Also it could be due to different source data as usually the providers do not match up a 100% in delivered ticks / quotes.

http://www.ninjatrader-support.com/HelpGuideV6/HowDoesNinjaTraderBuildChartBars.html

[nrgtrader]

So I exported the data from NT to make sure it was the same. So it appears to be a smoothed %D. I am going to try to recreate it in NT.

Thanks for your suggestions.

[NinjaTrader_Bertrand]

Hmm, from the first shot it seems to be the K of the regular Stochastics, so just set for example Period D only to 1 to see one plot then...

[nrgtrader]

It appears to be a variation on the typical formula...

See the formula given below -- and the indicator in green...

[Harry]

Back in the 70s nobody had a PC. So traders and investors had to perform the calculations by hand. If you have a recursive formula like the second one, you only need the prior average and the new value to calculate the new average. For a simple 14-period moving average you have to subtract the value 14 periods ago and then add the latest one, more cumbersome.

If you look at the book from Wilder Welles "New Concepts in Technical Trading Systems" for the RSI formula, he actually recommends using a simple moving average, but all his manual calculations show that he uses a recursive formula called "Wilder's Smoothing". So some software packages implement the SMA (what the master taught) the other the exponential smoothing (what the master did), and others offer both.
I believe the master did not care at all.....

For the Stochastics, the choice is even larger. There is %K, the raw stochastics, for which most software developpers agree on the formula. However, the %D is a smoothed line. There are certainly more than 10 different options how to smooth a line. You may use simple, weighted, triangular, exponential smoothing and the result will still be a %D stochastic. You may go back to George Lane (Technical Analysis of Stocks and Commodities, May/June 1984) and find out what he suggested.

Why not try out different solutions and take what suits you best. NT makes it easy to replace a line. Whatever you do, it will remain one of the thousands of simple oscillators that were simply created to confuse traders.

Can anyone tell me why these two oscillators appear differently in different software, when the settings are the same (%K=9,%D=3,smooth=3). The software in question uses the following Calculation:


On nth period

Stochastic %D = Avg(Stoch%K(H, L, C, S), n)

Every period thereafter

Stochastic %D = (Previous Stochastic %D * (n-1) + Stoch%K(H, L, C, S)) / n

n = Smoothing periods

Stoch%K represents Stochastic %K
Avg represents Simple Moving Average

[nrgtrader]

Harry, thanks so much for response and especially historical context. I have Wilder's book, so I will have to reread paying more attention to the notation. I also appreciate your encouragement not to get to get too caught up in the minutiae of smoothing algorithms. It is more a curiosity than a search for holy grail -- although I do tend to like and be more accustomed to the method I am searching for...

[SteveM]

stochastic in Panel 1

Hello every one

Is there any one who can help me find how to lay the stochastics or any other indicator on panel 1 rather than other panels. I use NT6.5. More so I would appreciate some one doing it for me as I am challenged with regards to computer programming / indicator programming.

Thanks a million in advance.

Steve