Q: I have been trying to enter a setting of Fast Stoc 21-13-2 and all I get is a setting of 21-13. The third box just disappears when I enter UPDATE CHART. Please advise what I am doing wrong.

A: There are three options for Stochastics - Fast, Slow and Full.

The Fast Stochastic Oscillator only has two variables, both of which can be set with the boxes to the right of the indicator drop down menu on SharpCharts. The first box is to set the number of periods used to calculate the actual Fast Stochastic Oscillator (fast means without smoothing). The number of periods for calculation is referred to as the look-back period. For example, a 20-day Fast Stochastic Oscillator would cover data for the last 20 trading days. The second box is for the signal line (also called trigger line), which is a simple moving average (SMA) of the actual fast stochastic oscillator. A (20,5) Fast Stochastic Oscillator would be a 20-period (unsmoothed) stochastics with a 5-period SMA as the signal line. With a red, white and blue color scheme, the Fast Stochastic Oscillator would be the thick black line and the signal line would be the thin red line. To duplicate a (20,5) Fast Stochastic Oscillator, I would set the Full Stochastic Oscillator to (20,1,5).

The Slow Stochastic Oscillator only has two variable boxes as well. The first variable sets the number of look-back periods for the actual Slow Stochastic Oscillator. The second box sets the number of periods for the signal line, which is a separate SMA of the actual Slow Stochastic Oscillator. The actual Slow Stochastic Oscillator is simply a smoothed version of the Fast Stochastic Oscillator. A 20-period Slow Stochastic Oscillator is the same as a 20-period Fast Stochastic Oscillator that has been smoothed with a 3-day SMA. On the example, the first indicator box shows a (20,5) Fast Stochastic Oscillator. The third indicator box shows a (20,5) Slow Stochastic Oscillator, which produces a smoother line. To replicate a (20,5) Slow Stochastic Oscillator, the Full Stochastic Oscillator would be set to (20,3,5) where 20 = the look back period, 3 = the number of periods used in the SMA to smooth the Stochastics, and 5 = the number of periods for the SMA to create the signal line.

The Full Stochastic Oscillator has three variable boxes. The first variable sets the look-back period. The second variable sets the number of periods to smooth the Stochastic Oscillator. A 1-period smoothing (which equals no smoothing) would simply be a Fast Stochastic Oscillator. A 3-period smoothing (which would smooth with a 3-day SMA) would be equivalent to the Slow Stochastic Oscillator. Some traders prefer more smoothing tham 3 days. Therefore, the Full Stochastic Oscillator allows you to set the smoothing higher. In the bottom indicator box, I set the smoothing periods for the Full Stochastic Oscillator at 10. As you can see from the chart, the line is much smoother than when the smoothing is set at 3 (shown in the indicator box just above). The final variable in the Full Stochastic Oscillator is to calculate the trigger line, which is simply a SMA of your Full Stochastic Oscillator. If the Full Stochastic Oscillator is set for 20-periods with 10-periods of smoothing, then the signal line will be a 5-day SMA of this Full Stochastic Oscillator. For all Stochastic Oscillators, the signal line (thin red line) is a simple moving average of the actual Stochastic Oscillator (thick black line).

(Live version of this chart)

For more detail on the Stochastic Oscillator, see this Chart School article.

Hope this helps.
Cheers, Arthur Hill

Q: I sold my position in the QQQs on Friday morning. I am very behind, I got nervous, and sold. Well, the Qs made a come back, I sold at 63, it closed at 65 and change. Should I get back in and look for a reaction high to the 77 level and recoup some money? I just came across this site. Thank you for your help and commentary.

A: Sorry, I cannot give advice on individual positions, but here are some things to think about:

• Is the stock oversold and how far could it advance?
• Is the stock overbought and how far could it decline?
• Where is resistance?
• Where is support?
• What are the short, intermediate and long-term trends?
• What are the dominant short, intermediate and long-term chart features (patterns, candlesticks, gaps, volume, reversals)?
• What is the path of least resistance?
• What is the reward-to-risk ratio?
• Where is the exit and stop-loss?
• Can you sleep with this position?

Arthur Hill