Stochastic OTT

The Stochastic Optimized Trend Tracker (SOTT) indicator applies the Optimized Trend Tracker (OTT) methodology to a Stochastic Oscillator to filter out market noise and provide clearer trend signals. By utilizing Variable Index Dynamic Average (VIDYA) for both stochastic smoothing and OTT calculations, the tool aims to resolve the inherent volatility and "fake signals" often associated with standard momentum oscillators.

Usage

The Usage section describes how the script can be used to identify market momentum and trend reversals. The SOTT indicator transforms the standard 0-100 stochastic scale into a higher range (centered around 1000) to allow for more precise percentage-based calculations of the OTT line.

• Trend Identification: When the smoothed Stochastic (%K) line is above the OTT line, it indicates a bullish trend. Conversely, when it falls below the OTT line, it indicates a bearish trend.
• Signal Generation: Traders can look for crossovers between the %K line and the OTT line as potential entry or exit points. Optional visual labels can be enabled to highlight these crossover events.
• Timeframe Optimization: While the default settings (%K Length: 500, %K Smoothing: 200) are optimized for low-timeframe stock trading (e.g., 1-minute charts), users should adjust these parameters for higher timeframes or different asset classes like Forex or Crypto.

Details

The script is a derived version of the original Optimized Trend Tracker developed by Anıl Özekşi. It replaces standard price input with a Stochastic Oscillator value that has been shifted by 1000 units.

The core calculation uses a custom VIDYA function (varFunc), which incorporates a Chande Momentum Oscillator (CMO) to adjust the alpha (smoothing factor) dynamically. This allows the indicator to become more sensitive during high-volatility periods and smoother during sideways consolidation. The OTT line acts as a trailing support/resistance level that shifts based on the specified percentage offset, helping traders stay in trends longer while avoiding premature exits.

Settings

• %K Length: Sets the lookback period for the raw Stochastic calculation.
• %K Smoothing: Determines the length of the VIDYA-based smoothing applied to the Stochastic line.
• OTT Period: The length used for the internal moving average within the OTT calculation.
• OTT Percent: The percentage offset that determines how far the trailing stop/support line sits from the moving average.
• Show Support Line?: Toggles the visibility of the underlying VIDYA moving average used to calculate the OTT.
• Show Stochastic/OTT Crossing Signals?: Enables or disables on-chart "Buy" and "Sell" labels when the %K crosses the OTT line.

FAQ

How do I interpret the values on the Y-axis? The indicator scales the Stochastic oscillator by adding 1000 to the value. This "exaggerated" scale is necessary for the OTT percentage-based calculations to function effectively on an oscillator.

What are the recommended settings for daily charts? The defaults are tailored for 1-minute charts. For daily charts, you may want to reduce the %K Length and Smoothing parameters to make the indicator more responsive to long-term price action.

How can I access this indicator? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.