Stochastic that does not use “pure” price for calculation but uses adaptive lookback average filtered price for calculation
Of price filtering for stochastic :
The advantage of using the filtered (smoothed) price is that some of the false signals are filtered out at the source itself (by averaging the price) and it the is omitted (the false signal) in the stochastic calculation) too. Also, since the average is adaptive it implicitly makes the stochastic adaptive too
ALB averages that can be used :
simple moving average
exponential moving average
smoothed moving average
linear weighted moving average
Normalized zones :
The zones are added in order to assess a “strength” of the current stochastic value and a possible reversal or trend exhaustion
Usage :
Some experimenting with parameters is advised, but the usage of this stochastic is the usual : either use the slope or some significant levels crossing for signals
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