stochastic

[renkoben]

why is it that the "stochastic" indicator on NT is choppy?

I need a "14,7,3" stochastic. When I plug those numbers into the NT stochastic I get a choppy stochastic and it looks very different from the 14,7,3 stochastic in the literature

it appears that the sequence of numbers for the settings on stochastic on NT is different than nearly all the web places I've seen.

None of the other websites has a mention of the "smooth"

can someone help me out?

[NinjaTrader_AdamP]

renkoben,

We generally use industry standard formulas for these things, however there may be slight differences depending on the indicator.

What literature are you comparing to?

[Harry]

why is it that the "stochastic" indicator on NT is choppy?

I need a "14,7,3" stochastic. When I plug those numbers into the NT stochastic I get a choppy stochastic and it looks very different from the 14,7,3 stochastic in the literature

it appears that the sequence of numbers for the settings on stochastic on NT is different than nearly all the web places I've seen.

None of the other websites has a mention of the "smooth"

can someone help me out?

NinjaTrader has the Stochastics correctly implemented. You should check your "literature" again, maybe what you looked at was not a Stochastics.

There are two stochastics indicators, the Fast Stochastic and the Slow Stochastic.

Fast Stochastics

%K = 100 * (Current Close - Lowest Low(N) / (Highest High(N) - Lowest Low(N))
%D is a 3-period SMA of the %K line

It has two parameters

- the lookback period for K, which is called periodK (default value 14)
- the smoothing period for the SMA, which is called periodD (default value 3)

Slow Stochastics

%K is the fast line of the Slow Stochastics, which is identical to the slow line %D of the Fast Stochastics.
%D is a 7-period SMA of the %K-line.

It comes with three parameters

- the lookback period for K, which is called periodK (defalut value 14)
- the smoothing period used to produce the slow line of the Fast Stochastics, which is called smooth (this is identical to period D of the fast stochastics)
- the smoothing period for the SMA of the Slow Stochastics, which is called periodD (default value 7)


To summarize

The Raw Stochastics is smoothed twice. The first step of smoothing produces the %D of the Fast Stochastics, which becomes the %K of the Slow Stochastics. The second step of smoothing produces the %D of the Slow Stochastics.


Rare Variations of the Stochastics

NinjaTrader has the original formula implemented, which was developed by George Lane and which can be found in the early editions of the magazine "Technical Analysis of Stocks and Commodities" (see contributions by Thom Hartle). There are also some known variations of the Stochastics, which are rarely used.

Variation 1: The original Stochastics smoothes the fast %K and the slow %K lines by using simple moving averages. You can also try other methods, such as exponential, triangular, weighted or even volume weighted smoothing.

Variation 2: It is possible to modify the formula for the fast %K line and replace the Highest High and Lowest Low with Highest Close and Lowest Close. The formula for the fast Stochastics would then be

%K = 100 * (Current Close - Lowest Close(N) / (Highest Close(N) - Lowest Close(N))

Instead of using the close you can also use the Median or Typical Price.

The variations mentioned above are not used very often, and you will probably not find them in the "literature".