Many traders believe that tops and bottoms are indicated when a financial instrument’s slow stochastic %D value goes above 70 or below 30. Some also believe that you should wait until the slow stochastics %K value rises above the slow stochastic %D value. They also believe that divergence between stochastics and price action on a chart could point out a turning point for the instrument. Investigator lets you test these theories. Investigator also allows you to combine the Relative Strength Index testing conditions with bar patterns and other indicator testing conditions.
There are two testing dialog boxes associated with stochastics. In the first dialog box, select the time period and enter the number of bars and the number of bars ago value that you want to use for testing. You also need to decide whether you want to use regular or slowed stochastics.
The first option you can choose is %K Above: or Below:. If you choose the %K Above: option, you are asking Investigator to see if the current bar’s %K value is greater than the number you’ve entered in the %K Above: edit box. If you choose the %K Below: option, you are asking Investigator to see if the current bar’s %K value is less than the number you’ve entered in the %K Below: edit box. You can also select the Just Crossed? parameter.
You can also optionally select the And Then Above/Below: option. If you checked the %K Above: option, this will test whether the price has first risen above the %K Above: edit box value and then dropped below the And Then Above/Below: edit box value within the given number of bars. More specifically, Investigator takes the current bar, subtracts the specified number of bars, moves up one bar, and starts moving forward in time checking to see if the %K value of each bar is above the %K Above: edit box value. If the %K value is above the %K Above: edit box value, Investigator starts moving forward in time to see if the %K value of a bar is below the And Then Above/Below: edit box value. If this occurs before the current date, the condition is met.
Note that this can happen at any time within the bars specified. For example, if you specify ten bars and the %K value of eight bars ago is higher than the %K Above: edit box value and the %K value of two bars ago is lower than the And Then Above/Below: edit box value, the condition would be met. If you want the value to have just crossed below the %K value, select the Just Crossed? parameter. If you select both just crossed values, this indicates that you want the price to have crossed above the %K Above: edit box value exactly the number of bars indicated and then just cross below the And Then Above/Below: edit box value on the current date. For example, if you enter ten bars and select both just crossed values, this indicates that the %K value of the bar nine bars ago must have just crossed above the %K Above: edit box value and the %K value of the current bar must have just crossed below the And Then Above/Below: edit box value.
The converse of the above two paragraphs applies if you select the %K Below And Then Above option.
The other option you can choose is %K Divergence Up or Down. If you select the %K Divergence Up or Down option, you must enter the number of bars that you wish Investigator to check for the divergence. The program default is 10.
The second dialog box, which can be reached by clicking on the Next button, is similar to the first dialog box, only the options apply to %D. Also, in this dialog box you can select the %K < %D option to have Investigator check whether the current %K is less than the current %D, or if you choose, you can select the %D < %K option to have Investigator check whether the current %D is less than the current %K. To get back to the previous dialog box, you can click the Back button.