I was being sarcastic.. I love the stochastic oscillator. If you know how to read it it is pure gold on the dailies.. notice how it will read overbought or oversold yet these readings will stay at roughly the same level until there will be a final spike high or low.. it is THEN when the oscillator is pure gold.. Otherwise you leave it alone. When the oscillator reaches EXTREME levels there is nowhere else to go. It's most useful to exit trades, but can also be used to enter low risk high reward trades if the extreme reading coincides with above average s/r..
You cannot enter trades based on an oversold reading alone .. You have to essentially calculate the reading IF spot reaches a certain point in a certain amount of time thereby causing an extreme reading. So if you see spot at an oversold reading and are expecting a resumption of a downtrend you can attempt to calculate the point where it will have serious difficulty surpassing due to a lack of sellers and will have little choice but to retrace.
Perfect? no, of course not, but when you're talking about risking 30 pips for 350 pips then you essentially need an 8% success rate in order to break even.
A lot of traders will say, "well, I see other points where spot was ob/os and it did retrace while other times it did not.. this is a clear indication that the stochastic osciallator is a coin flip."
This is incorrect.. This is an issue of impatience and not waiting for a spike top or bottom.. THAT is where you t/p and if you are a ballsy trader you can attempt to get in VERY early on a new trade even when the majority of the peanut gallery of opinions are telling you the obvious.. "cable is in a downtrend" .. yes, but Cable cannot continue downward forever due to the basic mechanics of the market. Very few will choose to accept the view of the peanut gallery when they are riding a 600 pip profit.. They will take profit and others in tow will take profit.
You might think indicators are flakey, but you should pay attention because there are many others who don't believe the same. Despite the fact that many people do not believe in God there are many who do and as a result shops are closed on Sunday and there is less traffic on the roads Sunday morning. So despite the fact that some traders do not believe in indicators, the wise trader prepares for less traffic on Sunday morning.
This is not a pipe dream or wishful thinking, but the simple and inevitable mechanics of the market. Watch the price action on 9/11 and even in an amazingly strong downtrend the simple principles described by Elliot unfold in beautiful mathematical fashion.. Scalpers will cause a paradoxical reversal which will reverse itself, Short-termers are incapable of holding a trade longer than the stars in their eyes will allow.. Medium-termers are painfully aware of major s/r and painfully aware that UNLESS in the face of overwhelming evidence to support otherwise it is time to take profit.. Long-termers do what they will.. I don't understand but more power to them.. In any case, don't be so foolish as to allow the tide to turn against you. When it is time to take profit there are numerous mathematical indicators to tell you. If you play probabilities then indicators can tell you when to enter as well..It's never straightforward, nor easy, but this week I missed a 350 reversal in a 600+ downtrend by a matter of 11 pips.. tough, but that's trading.. Don't immediately discount the importance of indicators because the majority of run-of-the-mill schmucky traders can't use them or improperly use them.
