Stochastic, MACD, Bollinger Bands Plus Day And Swing Traders

Learn How To Day And Swing Trade Using Stochastic, MACD, Bollinger Bands Like A Pro

Stochastic Oscillator Settings

One of my favorite momentum oscillators is the stochastic oscillator.
The stochastic oscillator has done a phenomenal job in smoothing the price-action, and depicting every rise, fall and turn in the financial markets. 

Many trading platforms has given technical traders the freedom to reset the stochastic oscillator settings.  Therefore, some use stochastic oscillator settings (14, 3, 3), (12, 3, 3), (5, 3, 3), (6, 3, 3), (8, 3, 3) and more.

The most creative technical traders are the beginner stochastic oscillator traders who often change their settings after every challenging
trading session.

In the early years of my trading life, like many other momentum traders,
I have played the game of rebooting my stochastic oscillator settings.

I began by using the stochastic setting (6, 3, 3) on the three-minute chart. When I look back, I feel a bit ashamed because I was misusing the stochastic oscillator like a donkey (stupid).  I was not the only person doing that.  In fact, that was the common teaching until my stochastic oscillator trader's inner eyes were widely open.

Since that day, I only use the best stochastic oscillator setting.
I would say, it was a revelation. I have also stopped changing my settings because now I can trade the stochastic like a pro. 

As I pushed my understanding of the stochastic indicator to the highest level, there was no more need to change the settings.  I would say I am liberated from the urge of changing the stochastic oscillator settings after every losing trade.

Technical traders will always try to reset their momentum oscillators as long as they do not fully understand them.  Even some professional traders who are tired of changing the stochastic oscillator settings are still misusing George Lane's momentum oscillator.  

Those professionals technical traders that are moving colossal amount of money in the financial markets can create long term assets' price distortion.

Reasons Why Traders Change Stochastic Oscillator Settings

1/ Most stochastic oscillator traders do not know the number one role of the stochastic oscillator.  

That role is to pinpoint accurate bullish and bearish divergences.  In normal conditions, the stochastic oscillator will faithfully mimic the price structures.  Therefore, any divergences needed to be noted or flagged.   And the stochastic indicator does it with flying colors. 

Indeed, those divergences are very interesting.  Really, they are the reasons why George Lane created the most sought after momentum oscillator.

Once, a day or swing trader gets it, he or she will find the best stochastic oscillator settings.  That was exactly what has made me a master stochastic trader.

2/ Traders who are trading the momentum indicator instead of the price-action will always change the stochastic oscillator settings.

However, the day they meet me, and I explain to them that one should not prioritize the overbought and oversold stochastic signals in both rising and declining channels, they will put an end to their roller-coaster lifestyle of rebooting the stochastic oscillator settings

The stochastic main function is not to pinpoint overbought and oversold trade signals especially during trending phases.  It may help during consolidations or corrective waves.

3/ Another reason why technical traders change the stochastic settings is because they spend too much time examining the momentum oscillator instead of deciphering the price structures.  A momentum trader who is looking down more than up will constantly blame the oscillator therefore change the settings after a losing trade.

4/ Sometimes, for the purpose of back testing, market participants do twist the stochastic oscillator settings.  That is a vital strategy in view to improve a trading strategy.  Nevertheless, one should not forget that the market patterns will determine the appropriate strategy one must deploy not the best settings.

5/ For the purpose of speculative trading in the financial markets, others do reset their stochastic oscillator settings.  A speculative market player may use different stochastic settings for specific financial instruments on designated time frames in view to optimize speculative technical trading strategies.  

I was using the stochastic (6, 3, 3) specifically on the 3M chart for financial instruments that move fast (momentum trading).

Best Stochastic Oscillator Settings

Take it from me after years in the wilderness, I have settled for the stochastic oscillator setting (8, 3, 3).  It works on every time frame if one knows how to use the slow stochastic indicator.  I do not use the fast stochastic.  I only use the slow stochastic indicator.   

I have used the (6, 3, 3) for a long time, but now as I fully mature as an advanced technical trader, I pull out all the time the stochastic oscillator setting (8, 3, 3).

Some will say they prefer the stochastic settings (14, 3, 3) or (12, 3, 3).
Those traders are in fact MACD traders who prefer to use the stochastic oscillator.  Though they are using the stochastic oscillator, they are trading it like the MACD indicator. 

Considering that the stochastic oscillator's primary role is to highlight bullish and bearish divergences, the stochastic oscillator setting (8, 3, 3) has exceeded the expectation of technical traders who master the top-trading method. 

Yes, I will always recommend the stochastic oscillator setting (8, 3, 3).
It is the best stochastic oscillator setting. Today, we know that if there is a substitute for a price-action's rate of change (momentum), it will be the moving average eight.


Look, CCI traders will look for the best CCI settings, and MACD traders will not stop searching for the best MACD indicator settings. Stochastic traders are just looking for that technical indicator that will trade for them. That technical indicator that trades for traders like a money machine does not exist.

Really, to make the stochastic oscillator settings work harder for one, one must become a better stochastic trader.  Once a trader reaches that stage, the urge of changing the stochastic oscillator
settings becomes irrelevant. 

The real question is always to be or not to be.

Become a better stochastic oscillator trader, and the best stochastic oscillator settings (8, 3, 3) will work harder for you.

Use the stochastic settings (8, 3, 3), but remember to learn to master the stochastic patterns.

That is it friends and foes, I have now completed my goal to write an engaging article about the stochastic oscillator settings.  I hope it has been useful to you.  If that is the fact, do not hesitate to share it on the social media.  Use the social sharing button on this page.

For me, it will not be a very long time before I start writing about the stochastic oscillator trading licence.  That is right.

Should a technical trader have a licence to trade the stochastic oscillator?  Should MACD be the little sister or brother of stochastic oscillator? Why does it make sense to combine the MACD indicator
and stochastic oscillator?

Stay tuned because I will be back soon with another article.
Call me Mr Stochastic.

Thank you for visiting Stochastic-MACD. COM.

This article is written by George Beaulieu.