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1990issue C071-4

Slow stochastic construction for index pullback entries

The raw stochastic value places the latest close in a 20-session high-low range and is scaled from 0 to 100. Slow percent K and slow percent D smooth that reading, a strength precondition gates the long, and the position ends on a crossover exit or a 60-point close-based stop.

  • The raw stochastic value places the latest close inside a 20-session high-low range and is scaled from 0 to 100; slow percent K and slow percent D then apply the same two-plus-one blend.
  • No long is considered until slow 20-day percent D has first reached 84, so a later dip is treated as a reaction to a strong advance.
  • A long is taken when percent D falls below 70 and percent K is at least 4 points below percent D, then closed by a crossover exit or a 60-point close-based stop.
  • Those shared thresholds settle, in one procedure, what counts as a strong advance, when the following retreat may be bought, and when the position must end.
Entries in this reading3 entries
Stop-loss order144 readingsCurrent trackStochastic oscillator170 readingsRule-based entry174 readings

How the oscillator is built

The oscillator’s raw reading places the latest close inside the 20-session high-low range and is scaled from 0 to 100. That raw stochastic value is the 0-to-100 placement of the latest close between the lowest low and highest high of a fixed 20-session lookback.

Slow percent K blends twice the prior percent K with the new raw reading and divides by three. Slow percent D applies the same two-plus-one blend to percent K and acts as the system trigger line.

The strength precondition and the long

No long is considered until the slow 20-day percent D has first reached 84. That strength precondition treats a later dip as a reaction to a strong advance, not an ordinary pullback.

A rule-based pullback entry is taken the next time percent D falls below 70 while percent K is at least 4 points below percent D. The long is allowed only after the precondition has been met.

How the long is closed

The long is closed when percent K is at least 4 points above percent D and percent D is 30 or higher, or when a 60-point close-based stop is reached.

The crossover exit uses those oscillator conditions. The close-based stop is a 60-point index stop judged on the close, used to bound the loss if the oscillator exit has not yet fired.

What the shared thresholds settle

Those shared thresholds are written to settle, in one procedure, what counts as a strong advance, when the following retreat may be bought, and when the position must end.

Cases from the historical sample

In the historical sample the typical hold lasted a little more than eight trading sessions.

Illustrated cases include a monthly map of the signals, a September 1984 reaction entry, an April 1986 reaction that followed the retreat, and a trade that entered on the rules but then failed as the market sagged.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
5 of 42 in the Stochastic oscillator track
19911-1 pp.Next on Stochastic oscillatorRandom Walk Index construction with an adaptive lookbackThe Random Walk Index is an observed high or low excursion divided by the distance a random walk would be expected to cover over the same number of days.
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 fieldEntry and exit rules206 readingsBy year199092 readings
All 170 readings tagged Stochastic oscillator
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