Over Bought/Sold oscillators when should they be taken seriously?

[Grey1]

I think the key in using any OS/OB indicator has to be

1) IT MUST BE USED AS A SECONDARY TOOL FOR FUNE TUNING TO THE MARKET PLAYERS AND NOT A PRIMARY INDICATOR..

2) OB/OS must not be too fast to respond to market noise.

3) Must contain High,LOW,Close in its calculation and not just the close.. ( Standard CCI is one of the best but has to be slowed down a bit )



It is terribly important to have a meaning ful and SOLID first indicator and only use te OB/OS indicator for confirmation and risk reduction at entry ... Much like L2

 

[bonsai]

High/Low/Close gives you only 3 reference points in your calc ?

so a 5 min bar has 3 points same as a 10 min bar.

much better to use all 5 or all 10 as the case may be ,imo

 

[Grey1]

Bonsai,

I am not refering to multi time frame analysis here.. What I am saying is , in any time frame you are trading then you must use indicators which use all 3 reference points than only close..

regards

 

[bonsai]

sorry grey but I am confused now.

I didnt think I was talking about multi time frame analysis.
(not even sure what that might be in this context)

If you put up a 10 min bar of price on most commercial systems
and then put up an OB/OS , the system will calculate the OB/OS using the H/L/C in its calculation.
But if I am right, that calculation only includes the High during that 10 mins and the Low during that 10 mins.
So with the Close, you have only 3 reference points as to what happened in those 10 mins.

What I was recommending was that, as in this case if the unit is Mins, the HLC of each Min should be included in the calc for that indicator.

More 'factual' and of course less 'jerky'

?

 

[Grey1]

Bonsai,

Sorry mate , I am just referring to TA indicators in general irrespective of time frames..

RSI only uses CLOSE in its design where CCI uses H,LO,Close..


I meant to avoid indicators which only use one item of info in their design in this case being \RSI ..

 

[bonsai]

ok

yes, agree that's a weakness of the commercial systems.

 

[BBB]

Anything that uses h/l/c MUST be more meaningful than just the close.

But, I'm still a bit weary of taking ob/os signals from CCI. I know of a trader whose main buy signal confirmation is when the CCI has risen from -100, through 0 and crossed 100 (OB). He does quite well doing this. He uses the CCI as a warning to get out when it crosses back below 0. He's obviously buying everyone's lots when they sell as they see CCI go into OB. He stays in the trend far longer by taking the opposite side.

 

[BBB]

... he uses a basic 25 period CCI to do this.

 

[Grey1]

BBB,

you are spot on.. NO OB /OS signal should be used as primary tool.. You only use the OB /OS as secondary tool along side l2. Sort of fine tuning tool than any thing else.. CCI on its own is too fast and trades all noise.. it has to be slowed down ideally using an autoregressive tool .. realtick offers this as standard..

regards