Formulae Stochastic Fast Stochastic
Fast %K. The system identifies the highest high,
lowest low, and the current price (either
open, high, low, close, midpoint, or average), for a specified period (number of bars.) It subtracts the lowest low
from the current price,
then divides the difference
by the range (where the range is the highest high to lowest low). The result
becomes the first fast %K value. The system continues to calculate fast %K
values by excluding the oldest bar and including the next more recent bar
before repeating the above calculation.
Fast %D.Вр
This
is a moving average of fast %K values.
Slow Stochastic
Fast %K and Fast %D are calculated as above (not displayed). Slow %K is
equal to the fast %D. Slow %D is a moving average of slow %K values. "
When slow
stochastic is
selected, the system internally calculates both the fast and slow stochastic;
however, only the slow %K and slow %D lines are displayed on the screen.
The following are variables for the two stochastic studies above:
S Stoch Period
and price used for the calculation of an
unseen
Fast %K
S Stoch %KВрВрВрВрВр Period and type of
average used for the calculation of an unseen Fast %D. This value is also slow
%K
S Stoch %DВрВрВрВрВр Period and fype of average used for the calculation
of slow %D
F Stoch Period
and pnce used for the
calculation of a fast %K
F Stoch %DВрВрВрВрВр Period and type of average used for the calculation
of a fast %D.
Note that the price
for the calculation of %K
is usually the close.
The periВэod and type of moving average for the calculation of the %D is usually 3-period smoothed. Other prices, periods, and types
may be entered in the study
variables setup.
Smoothed Moving Average
The following indicator formulae are reprinted with permission of CQG
Inc. These are the indicator calculations used on my CQG System One. These
formulae can be programmed into your computer, computed by hand, or programmed
into Omega TradeStation of System Writer.
A smoothed
moving average differs
from a simple
moving average in
terms of the value that is subtracted before each calculation. In a simple
moving average, the oldest value is subtracted. In a smoothed moving average
the previous smoothed average value is subtracted. The first value for a
smoothed moving average is determined by the formula SMI. It is plotted on the
chart at the third bar from the left side of the screen.
Price 1 + price 2 + price 3
Period
The next value would be determined by formula SM2. It is plotted at the
fourth bar from the left side of the screen.
Previous sum тАФ previous ave + price 4 SM2=
тАФ
Period
For the calculation of SM2, previous sum is
the sum of price 1 + price 2 + price 3; previous avg is
the value of SMI.
The next value would be determined by formula SM3. It is plotted at the
fifth bar from the left side of the screen.
Previous sum тАФ previous avg + price 5 Period
Subsequent values would be determined by subtracting the previous avg
from the previous sum, adding the next more recent price, then dividing by the
period.
Category: Day trader
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