Have no idea of how long this reversal will last, but it is interesting that the stoch. osc. predicted the start / end of the last major down trend in this graph (DX is usd compared to basket of 30 other currencies).
Appologies for the poor quality of picture - I don't have raw data. The original comes from:
Yeh, indicators are like statistics, i.e. they show exactly what one wants them to show.
In the chart you put up there are several instances where the signal didn't work.
For the sake of a sensible discussion about indicators (or, if you like, this one in particular) it would be a good idea to go back a while (say a period of five or six years) and see how reliable this stochastic indicator actually is or isn't. One may be quite surprised.
Pisces111
tech/a
8th-February-2005, 07:49 AM
Indicators are sums of past history in price or volume.
As such they can only INDICATE what price action may do.
Many practitioners have tested the success rates of various indicators
and its widely argued that over a very long term they are no better than random.This ofcourse can be argued infinitum.
Divergence as shown here is one of the few leading indicators that has a predictive edge in my veiw.
Using any indicator in trading should be veiwed that succeed of fail you have a plan of action in place.Failure for me is a stop going off and another opportunity explored.Eventually one will take off and thats the one you stay on.
markrmau
8th-February-2005, 10:14 AM
Yeh, indicators are like statistics, i.e. they show exactly what one wants them to show.
In the chart you put up there are several instances where the signal didn't work.
For the sake of a sensible discussion about indicators (or, if you like, this one in particular) it would be a good idea to go back a while (say a period of five or six years) and see how reliable this stochastic indicator actually is or isn't. One may be quite surprised.Pisces111
Don't worry, by nature I am very sceptical about indicators, but am interested in testing thier application - this one in particular. I disagree about there being instances where the signal doesn't work in this usd/dx. Don't forget the signal is indicated by a divergence between price action and oscillator (first set of grey lines) or convergence (second set of lines). I don't see this occuring elsewhere ??? However I have seen a few stocks where the divergence definately did not signal the end of an up trend (ori, pbl).
I am writing my own code to automatically recognize the divergence for an entry point and back test this over last 4 years of ASX data. This takes time of course though.
Also I disagree that statistics is imprecise. Ironically, it is the most precise science we have.
still_in_school
9th-February-2005, 06:06 PM
More food for thought...
USD against Gold prices..
Cheers,
sis
markrmau
17th-February-2005, 05:26 AM
Interesting, this relationship seems to have broken down this morning. (gold is finishing at top of range, and dx is going up as well). Don't know if this is temporary, caused by gold futures illiquidity, or what it means. Quite bullish for gold?
Any breakdown of the USD / Gold relationship with gold outperforming ought to signal the seccond phase of the gold bull market IMO. That is, the phase where gold starts appreciating in terms of all fiat currencies, not just USD.
The recent action of gold share prices suggests that something may be up but obviously it's a bit early to confirm.
:2twocents
DTM
21st-February-2005, 12:48 AM
From my understanding, the gold price dropped after the President's state of the union address outlined how their policies were going to shrink the trade deficit. The markets were initially excited by the policies but cracks have started appearing in them and may well be flawed.
Looking at the AUD/USD, in my opinion, I think the AUD is ready to start breaking new records. Gold is definitely on its way up again.
