Multi-Length Stochastic Average

September 20, 2021

This indicator returns the average of stochastic oscillators with periods ranging from 4 to length. This allows for a slightly more reactive oscillator as well as having information regarding the position of the price relative to rolling maximums/minimums of different periods. We introduce settings that allow for pre and post-smoothing, with selectable smoothing methods and periods for both steps.

This indicator returns the average of stochastic oscillators with periods ranging from 4 to length. This allows for a slightly more reactive oscillator as well as having information regarding the position of the price relative to rolling maximums/minimums of different periods.

We introduce settings that allow for pre and post-smoothing, with selectable smoothing methods and periods for both steps.

Settings

  • Length: Period of the indicator, determine the maximum period of the stochastic oscillator used in the average
  • Source: Source input of the indicator
  • Pre-Smoothing (1st Input): Degree of smoothing applied to the source input
  • Pre-Smoothing (2nd Input): Pre-Smoothing Method
  • Post-Smoothing (1st Input): Degree of smoothing applied to the final oscillator output
  • Post-Smoothing (2nd Input): Post-Smoothing Method

Smoothing methods include a simple moving average , a triangular moving average, and a least-squares moving average (this method can induce overshoots during the post-smoothing step). The user can also select "None".

Usage

The "multi-length" aspect of technical indicators is something that hasn't been deeply explored yet such indicators can give us information regarding both short-term and long-term information which was the motivation for the creation of the indicator.

The Multi-length Stochastic Average allows us to quantify the price position relative to a multitude of highest/lowest levels.

In the example above the oscillator returns the average of stochastic oscillators with periods ranging from 4 to 20, as well as multiple rolling minimums with periods ranging from 4 to 20. We can see that when the price is equal to all rolling minimums the oscillator is equal to 0, the oscillator would return 100 if the price were equal to all rolling maximums with periods in that same range.

The oscillator can be interpreted like any scaled oscillator and can be used to estimate trend direction as well as trend strength.

Here we only make of use pre-smoothing by using a period 20 simple moving average . The indicator graphical elements such as colors/circles can help us determine potential directions trends might take.

Circles are displayed when the oscillator crosses over/under the 20/80 level. Such conditions offer better timing than waiting for the oscillator to be greater/lower than 50 and are less subjective to noise than simply looking at the direction taken by the oscillator. However, it can suffer from potential retracements in a trend more easily, this is illustrated in the chart above.


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