A Smoothed Stochastic Based on Rolling Price Midpoints

Summary

This indicator applies a smoothed stochastic calculation to the midpoint of a rolling high-low range rather than directly to price. The midpoint is calculated from the highest high and lowest low over a lookback window. The document says this substitution reduces noise but also makes the indicator more lagged. It plots the inverted stochastic alongside a very long exponential average and a shorter signal average.

The proposed use is to help find entries or re-entries when a trend has already been identified, while the author suggests the indicator’s reversal logic may be more useful in flat markets. The document supplies parameter settings and indicator code but no charts, trade rules, or performance tests. It therefore describes an indicator construction and possible applications, not a validated trading system; users would need to define signals and assess behavior across markets and regimes.

Key ideas

• The indicator feeds a rolling high-low midpoint into a smoothed stochastic calculation.
• Using the midpoint is intended to reduce noise while increasing lag.
• The indicator plots the inverted stochastic with long-term and short-term exponential averages.
• Suggested uses include entries in an established trend and reversals in range-bound markets.
• No backtest or evidence of profitability is provided.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.