Using Filtered Prices in a Stochastic Oscillator

Summary

This document introduces a variation of the stochastic oscillator that calculates from a filtered price series. The standard indicator compares the close with the high-low range over a chosen period to gauge momentum and potential turning points. The variation allows a filter setting; at zero, the main line corresponds to a stochastic calculation on closing prices, while other settings create versions that the author says cannot be reproduced with the regular oscillator.

The author notes a potential issue: filtering can leave price unchanged for extended periods, which might be expected to impair a stochastic calculation. They report that the results appeared usable, but provide no charts, parameter recommendations, backtest, or performance measures. The document suggests using it like a regular stochastic and treating line color changes as signals, without defining confirmation rules or risk controls.

Key ideas

• The variation calculates a stochastic oscillator using filtered prices.
• Filtering can create prolonged runs of identical values that may affect the oscillator.
• A zero filter setting produces a main line based on closing prices.
• The author suggests using the indicator in the usual way or reading color changes as signals.
• No chart evidence, tested parameters, or performance results are supplied.

Tags

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