Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

daytradingradio

A Basic Guide To Stochastic Divergences By DayTraderRockStar.

Recommended Posts

The highlight for me this week was to find a pure stochastic divergence or what I call a Lane Divergence. George Lane was a technical analyst in the 50's and 60's that developed the Stochastic Oscillator. A momentum indicator that measures the momentum of a move so traders can get a idea when the market or security was getting ready to turn around. Lane was quoted about his stochastic indicator by saying "Stochastics measure the momentum of price. If you visualize a rocket going up into the air, before it can turn down, it must slow down. Momentum always changes direction before price." (and that's a fact).

 

Stochastics work on every time-frame and every trading vehicle. Futures,Stocks, etc.

 

Just the simple understanding of momentum and the example of the rocket. You can see how stochastics can give you that added edge to finding a good entry point. I use stochastics as the foundation to the High Probability Setups (HPS) method. By combining basic trends, support, patterns and the stochastics, you really do find the Highest Probability area where a stock will turn.

 

This week we saw a text book Lane divergence on the 60 min time frame. And a pure divergence is not just an oversold or overbought stochastic reading it is a confirmation or a change of momentum before the price changes.

 

Because stochastics can get embedded, (meaning pinned in an extreme level usually above 80-90 or below 20-10) they are susceptible to false readings. When you add the 4 other indicators to the equation, you lower that risk a lot, but it is still there. The key with the stochastics is looking for a pure divergence when the stochastics make a higher low but the stock price makes a lower low. This shows the momentum slowing and shifting like a rocket that is peaking, so the price follows suit. Here are some examples and the last one will be the example that happened this week and predicted the move higher today. (Some might say it was the jobs report) The fact is the divergence was there and it is not a common thing so when you find it you better watch it.

 

Basic Concept

 

type_1_bottom_bull.gif

 

Examples

 

stochastics-fig9.gif

 

Example 2

 

stochastic-divergence2.png

 

Example of both bearish and bullish divergence (Print this chart to remember both)

 

stochasticdivergenceexample.jpg

 

This weeks Chart

 

stochasticdivergencethisweek.jpg

 

Chart Larger Image View

chart1.PNG.f0d308a95925b501745ee2a2de4212bb.PNG

Edited by daytradingradio

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Similar Content

    • By lebnooni
      Hello I am interested in starting day trading, I have been trading the last year in long term investing but lately I have been getting really interested in day trading. I am from Canada and would like some pointers on where to start and what softwares, screeners, platforms etc to use here in Canada. Thanks in advance!
    • By sushilp
      Anyone interested to join day traders chat room? Join here http://www.daytraders.chat/
    • By trading4life
      Hello, My name is trading4life.
      I just joined this forum.
  • Topics

  • Posts

    • $CSCO Cisco Systems stock, nice top of range breakout, from Stocks to Watch at https://stockconsultant.com/?CSCOSEPN Septerna stock watch for a bottom breakout, good upside price gap
    • $CSCO Cisco Systems stock, nice top of range breakout, from Stocks to Watch at https://stockconsultant.com/?CSCOSEPN Septerna stock watch for a bottom breakout, good upside price gap
    • MNST Monster Beverage stock, top of range breakout above 60.45, from Stocks to Watch at https://stockconsultant.com/?MNST
    • ...hallucinates.... Student: “What if we gave the monkey LSD?” Guru: “The monkey already did LSD”
    • Question: To those that had/have cancer, what were the signs that made you think “something is not right here” to make you go see a doctor? Answer: So, 5/25/2018, I woke up, got ready for work, and as I walked to my car, I started gagging. Like something was stuck in my throat and I needed to clear it. And then it went away.   But 10 minutes after that, I was T-boned at 40mph on the driver side door. But what made me see a doctor was while my muscles felt better and bruises were going away, the gagging still continued, I started having fevers, my neck felt swollen, I was having such a hard time breathing, and I'd have random sharp pains in my chest, but not from where the seat belt saved me.   2 weeks after the accident, I finally see an urgent care doctor, who looks me over, tells me I'm fine, but luckily requests a neck X-ray. And I ask for a chest X-ray, which he rolls his eyes but let me have (most of my pain was in the neck, so I understand).   The very next day, he calls and says “So, that chest X-ray shows there's a 4 inch mass on your heart and lungs, and your lungs have been filling up with fluid, as well as in your pericardial (heart) wall. We need you to come in tomorrow.”   Turns out the big mass, due to the accident, caused my heart and lungs to tear and fill with fluid, the swollen neck and gagging was caused by 2 metastasized tumors, and the fevers and weight loss were symptoms. Stage 4b Hodgkin's Lymphoma.   But thankfully, we went very aggressive with chemo (and had a lot of bad side effects that don't normally happen to patients), and now I'm about 16 months cancer-free. Yay lucky X-rays! Rachel Jurina, Quora Source: https://www.quora.com/To-those-that-had-have-cancer-what-were-the-signs-that-made-you-think-something-is-not-right-here-to-make-you-go-see-a-doctor   Profits from free accurate cryptos signals: https://www.predictmag.com/  
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.