Bishop osculator stocks5/28/2023 ![]() ![]() Now that we have imported all the essential packages into our python environment. Python Implementation: import pandas as pd import numpy as np import requests from termcolor import colored as cl from math import floor import matplotlib.pyplot as plt plt.rcParams = (20, 10) (‘fivethirtyeight’) The secondary packages are going to be Math for mathematical functions and Termcolor for font customization (optional). ![]() The primary packages are going to be Pandas to work with data, NumPy to work with arrays and for complex functions, Matplotlib for plotting purposes, and Requests to make API calls. Importing the required packages into the python environment is a non-skippable step. ![]() We will be following the order mentioned in the above list and buckle up your seat belts to follow every upcoming coding part. Extracting the Stochastic Oscillator values 4. The coding part is classified into various steps as follows: 1. Before moving on, a note on disclaimer: This article’s sole purpose is to educate people and must be considered as an information piece but not as investment advice or so. Let’s now code our trading strategy in python to see some exciting results. This concludes our theory part on the Stochastic Oscillator and our trading strategy. ![]() Our trading strategy can be represented as follows: IF %K LINE BUY IF %K LINE > 80 AND %D LINE > 80 AND %K LINE > %D LINE => SELL Likewise, our strategy will reveal a sell signal when:Īs you can see, three conditions must get satisfied to either reveal a buy signal or a sell signal. Stochastic Oscillator trading strategy: Our trading strategy will reveal a buy signal when: Let’s gain some intuitions about our trading strategy based on the indicator. Now that we have an understanding of what the Stochastic Oscillator actually is. The standard setting of the %D line is 3 as the number of periods. It is also known as the smooth version of the %K line as the line graph of the %D line will look smoother than the %K line. %D Line: Otherwise known as the Slow Stochastic Indicator, is nothing but the moving average of the %K line for a specified period.%K = 100 * ((14 DAY CLOSING PRICE - 14 DAY LOWEST PRICE) - (14 DAY HIGHEST PRICE - 14 DAY LOWEST PRICE)) The way to calculate the %K line with the most popular setting of 14 as the number of periods can be represented as follows: The final value is arrived at by multiplying the value calculated from the above-mentioned steps by 100. This line is calculated by subtracting the lowest price the stock has reached over a specified number of periods from the closing price of the stock and this difference is then divided by the value calculated by subtracting the lowest price the stock has reached over a specified number of periods from the highest stock price. The sole purpose of this line is to express the current state of the market (overbought or oversold). It is otherwise known as the Fast Stochastic indicator. %K Line: This line is the most important and core component of the Stochastic Oscillator indicator.The Stochastic Oscillator comprises two main components: The general overbought and oversold levels are considered as 80 and 20 respectively but it could vary from one person to another. The values of the Stochastic Oscillator always lie between 0 to 100 due to its normalization function. Similarly, a stock reaches an oversold region when the market’s trend seems to be extremely bearish and has the tendency to bounce. What is overbought and oversold in a concerning market? A stock is said to be overbought when the market’s trend seems to be extremely bullish and bound to consolidate. Stochastic Oscillator is a momentum-based leading indicator that is widely used to identify whether the market is in the state of overbought or oversold. You can use the tool right away using the link here: Stochastic Oscillator It is a platform to backtest any number of trading strategies on different types of tradeable assets for free without coding. Without further ado, let’s jump into the article.īefore moving on, if you want to backtest your trading strategies without any coding, there is a solution for it. Additionally, we will also compare our trading results to the SPY ETF (an ETF specifically designed to track the S&P 500 market index) as a method to validate our strategy. In this article, we will use python to create a Stochastic Oscillator-based trading strategy and backtest the strategy to see how well it performs in the real-world market. It’s none other than the Stochastic Oscillator technical indicator. There are a bunch of technical indicators that can be considered for research and analysis but the one we are going to discuss today is one of the most popular indicators used among traders for trading purposes. ![]()
0 Comments
Leave a Reply. |