Double-Smoothed Stochastic Using a Fast-to-Slow EMA Ratio

Summary

This note describes a variation on the double-smoothed stochastic oscillator. Rather than applying the calculation to raw prices, it first uses the ratio of a fast exponential moving average to a slow exponential moving average. The text attributes the ratio approach to Walter Bressert while noting that the calculation itself predates that attribution.

The author says this input change can produce substantially different results in some cases and recommends experimenting with the ratio version. A proposed use is to treat changes in the indicator’s color as signals. The document gives no parameter settings, chart examples, performance results, or rules for entering and exiting trades. It therefore introduces an indicator variation and a possible signal interpretation, but does not establish whether either is effective or specify how to validate it.

Key ideas

• The indicator applies a double-smoothed stochastic calculation to the ratio of fast and slow price EMAs.
• The ratio construction is associated with Walter Bressert, though the calculation was known earlier.
• Using the EMA ratio instead of raw prices can materially change indicator behavior.
• Color changes are suggested as signals, but no entry, exit, or validation rules are supplied.

Tags

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