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Lane's_StochasticsLane's Stochastics indicates entry signals based on reactions of professional traders on the close. * The correct Lane configuration is to use 5 periods for %K. * Plot it with a 3 period exponential moving average of %K for %D * Plot it with a 3 period exponential moving average of %D for SlowD * Show all three lines over price.Stochastics is a leading indicator best used as an entry signal. Interpretation depends on %D strength compared to Price. Extreme levels reflect professional traders reactions to expected changes in trends. Stochastics have different success outcomes as a trading tool. In very volatile markets such as futures (high leverage) shorter time periods can give better results,,,in less volatile markets (bonds) longer time periods can give better trading profits. All indicators such as stochastics,,RSI,,MACD,,, etc,, use a math calculation (momentum ) to compare the current price with a previous price based on the time elapsed between the 2 prices,,,,,so for example ,,if the price of walmart changes from 50 to 45 in a week that is very unusual in that it is a big price change in a small amount of time the stocahstics will give a very overslid reading if you use short time frames in the formula,( ie, 3, 7 days), but if you use long time frames ( 1! month -5months) then the move from 50- 45 will seem less dramatic and you won't see it as a buy signal for a "tradeing profit" like buying at 45 and selling at 46,. |
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