The Advanced GET Stochastic indicator is designed to indicate when the market is overbought or oversold. It is based on the premise that when a market's price increases, the closing prices tend to move toward the daily highs and, conversely, when a market's price decreases, the closing prices move toward the daily lows. A Stochastic displays two lines, %K and %D. %K is calculated by finding the highest and lowest point in a trading period and then finding where the current close is in relation to that trading range. %K is then smoothed with a moving average. %D is a moving average of %K.
The Advanced GET Stochastic indicator differs from the "classic" Stochastic indicator in that it has a unique feature called the False Bar. The False Bar indicates the presence of a strong trend and that the standard overbought and oversold signals should be ignored. The False Bar is intended to help prevent selling or taking a short position in an strong uptrend and buying or taking a long position in a strong downtrend.
The indicator works best when the market is in a non-trending mode where it oscillates between the overbought and oversold ranges. A sell signal is generated when you have a crossover of the %K and the %D when both are above the band set at 75. A buy signal is generated when you have a crossover of the %K and the %D when both are below the band set at 25. However, if a False Bar appears above or below the crossover signal, these signals are not valid and should be ignored.
An alternate, more aggressive method of using the Stochastics is by using a pyramid system of adding on positions during a strong trend. As a major trend continues, you could use all of the crossing of the %K and %D regardless of where the Stochastics lines cross. For example, if you follow this approach in an up trending market, you would take all the upturns by the Stochastics as additional buy signals (to pyramid your positions), regardless of whether %K or %D reached the oversold zone. The Stochastics sell signals would be ignored, except to take short-term profits. The reverse would be true in a down trending market.
To apply the Advanced GET Stochastic indicator, left-click on the GET icon on the chart tool bar and select GET Stochastic on the drot
To change any of the parameters of the Advanced GET Stochastic, right-click in the Stochastic window below the chart window, then left-click on Edit Chart and select highlight Get Stochastic:
The Length number box indicates the number of bars used to find a moving average when calculating %K.
The %K number box indicates the period of the moving average that is used to smooth %K.
The %D number box contains the period of the moving average that is applied to %K to find %D.
The Bar Color selection list allows you to change the color of the False Bar.
The %K Color selection list allows you to change the color of the %K.
The %D Color selection list allows you to change the color of the %D.
The Upper and Lower Bands number boxes indicate at what level the bands will be drawn.
The Bands Color selection list allows you to change the color of the bands drawn on the Stochastics.
Click the Close button when finished.