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2008issue C081-5

Lock the stop at support before sizing a stochastic entry

Position size is computed only after entry, the initial stop-loss, account equity, and commissions are known. A stochastic-oscillator crossover can time a long or trend entry, but a nearby support level supplies the exit used to size the trade.

  • Position-size is computed only after entry, the initial stop-loss, account equity, and commissions are known.
  • A stochastic-oscillator crossover can flag a long or trend entry, but a nearby support or resistance level is the initial stop-loss used for sizing.
  • Payoff ratio, win rate, and the fraction of capital risked per trade feed the per-trade risk figure, while portfolio-risk stays under a stated equity cap and is spread across sectors.
  • A gap can fill beyond a resting stop, so planned stop distance does not fully contain market-risk and idle capital is kept off a single position.
Entries in this reading3 entries
Stop-loss order144 readingsCurrent trackStochastic oscillator170 readingsSupport and resistance170 readings

Know the exit before you size

Position size is computed only after entry, the initial stop-loss, account equity, and commissions are known. Without an exit known at the moment of entry, share or contract size cannot be calculated.

The stop-loss is a pre-entry exit level that bounds the planned loss if price reaches a chosen invalidation point. Position-size is the number of shares or contracts chosen so the distance from entry to stop stays inside a planned account-risk budget.

Place stops on support or resistance

Initial and trailing stops are located at support or resistance rather than at an invented point or a one-point move. Support-resistance is price structure used as a market-based invalidation level for initial and trailing stops.

A stochastic crossover times entry, not the exit

A stochastic-oscillator crossover can flag a long or trend entry but does not give the exit until a later reverse cross, so a nearby support level is used as the initial stop. The stochastic-oscillator is a crossover signal that can time entry but does not by itself locate the exit or size the trade.

Set the per-trade and portfolio budget

On a 200000 account, a 2 percent per-trade budget equals 4000 of planned loss, and open risk is kept to a 6 percent portfolio cap spread across sectors. Payoff ratio, win rate, and the fraction of capital risked per trade feed the per-trade risk figure used for sizing.

Portfolio-risk is the sum of planned losses across open trades, kept below a stated fraction of equity and spread across sectors.

Trail, scale out, and leave idle capital unused

After a move, new support can become a trailing-stop area, and an opposite-direction pivot after price has left both entry and the current stop can mark a scale-out. A gap can fill beyond a resting stop, so planned stop distance does not fully contain market-risk and idle capital is kept off a single position.

Market-risk is the chance that price gaps through a stop so the realized loss exceeds the planned stop distance.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
28 of 42 in the Stochastic oscillator track
201040-45 pp.Next on Stochastic oscillatorConstruct a center-line volume oscillator and read it with a stochastic oscillatorA volume oscillator is a center-line series that measures the percentage deviation of volume from an exponential moving average and moves above and below zero.
All readings on this track · 42 readings
  1. 1987Stochastic fast and slow construction as a rebuildable stack
  2. 1989Building the stochastic oscillator from close location
  3. 1990Monthly stochastics as a multi-year bond regime filter
  4. 1990Walk-forward screen for yen indicator rules
  5. 1990Slow stochastic construction for index pullback entries
  6. 1991Random Walk Index construction with an adaptive lookback
  7. 1991Building a two-stage stochastic oscillator from close location
  8. 1992Constructing fast and slow stochastic oscillator lines
  9. 1992Constructing nested stochastic lookbacks
  10. 1994Construct the four-state price-volume rank before filtering it
  11. 1996Crowded stochastics, false breakouts, and hidden stops
  12. 1997Fade and follow entries from stochastic extremes
  13. 1998Oversold confirmation as a staged rule-based-entry case
  14. 1999Constructing regular and slow stochastic oscillators
  15. 2001Construct a variable-interval simple moving average from stacked extremes
  16. 2001Threshold RSI and stochastic setups with next-bar stops
  17. 2001Two tests of a rate-adjusted earnings-yield gap
  18. 2002Constructing a two-line stochastic from a range-normalized close
  19. 2002Inspect mechanical stochastic daytrade rules on one bar
  20. 2003Constructing an adaptive stochastic RSI
  21. 2003Four parameters that construct a stochastic oscillator
  22. 2004Volume breakout as signal, pullback as entry
  23. 2004A first currency-market checklist with two averages and a slow stochastic
  24. 2005Shared-scale cycle indexes with companion oscillators
  25. 2005Current-bar versus prior-bar range construction for the stochastic oscillator
  26. 2005Two-session moving-average pullback short
  27. 2006Market condition as a permission layer for moving averages and oscillators
  28. 2008Lock the stop at support before sizing a stochastic entry
  29. 2010Construct a center-line volume oscillator and read it with a stochastic oscillator
  30. 2010Sharpened RSI turns with rainbow averages and a slow stochastic
  31. 2011Build a Spearman rank oscillator from ordered closes
  32. 2012Gold as a regime-dependent hedge in the euro-area crisis
  33. 2012Pairing moving averages with variable-length stochastics
  34. 2014Two-leg stochastic stress oscillator as a rebuild drill
  35. 2014Ingress dates as price bases for relative strength, stochastics, and moving averages
  36. 2017Constructing a dual EMA stochastic from range normalization
  37. 2018Constructing a two-stage stochastic RSI for comparable price-oscillator divergences
  38. 2018Combining a weekly stochastic, a long moving average, and two-day resistance
  39. 2018Weekly and daily stochastic readings with a long moving average and support
  40. 2018A confirming workflow for rotating from discretionary to staples
  41. 2019Stochastic scan thresholds, averages, and formula syntax
  42. 2020Constructing Slow %K as a two-stage helper
By fieldStops and loss limits40 readingsBy year200867 readings
All 170 readings tagged Stochastic oscillator
Also on Stochastic oscillator5 readings
1982Three gates on a 1982 pork-belly shortStop-loss order1990Slow stochastic construction for index pullback entriesStop-loss order1993Precommit stop bounds from equity and structureStop-loss order1994A clocked stochastic second crest with a window-high stopStop-loss order1996Crowded stochastics, false breakouts, and hidden stopsStop-loss order