Registered User
Joined: 11/4/2004
Posts: 5
|
I have been unable to get an answer from tech support or Don Worden on the following two questions.
1. I am unclear of the Relative Strength indicator graph meaning/interpretation when plotted on a price chart verse plotting the industry comparison (second line from top & clicking on plot industry comparison). First, when the RS indicator graph is higher than the price chart does that mean that the industry is outperforming the stock, The manual explanation (especially the last line on of it) seems to imply the opposite, i.e., if the industry is higher than the price chart the stock is outperforming the industry? Secondl, when I plot the industry comparison (second line from the top) there is no correlation with the relative streength graph? Also, when making the industry comparison visible dies it matter whether I do it by editing the price chart or by clicking on the industry group (second line form the top)?
2. I have been spending a lot of time trying to understand the 10/26/04 DW report custom stpcharstics template indicator. I can't seem to find crosslovers with Sir Knowledgeable's closed and open formulas. I am using 13 as the close and 3 as the period smoothed moving average . Also, he suggests 13 for both the close and open stpchastic? I am particlarly interest in this custom stochastic as a stop loss aid as mentioned in the report.
I would be grateful if you can clear up mY confusion on the above two issues.
Thanx
Dr. Glazer #542679
|
|
Worden Trainer
Joined: 10/1/2004
Posts: 4,308
|
Dr. Glazer:
Thanks for contacting us through the Ask a Trainer forum. You bring up some interesting issues concerning Relative Strength, Industry Comparison, and plotting lines such as these on the price chart directly. I would like to give a little thought as to the best way to address this, if you don't mind, so if you'll check back on this thread, I'll have something here for you within the next 24 hours.
Your question about custom Stochastics in a recent Worden report may require a bit more investigation, but I'll address that for you as soon as I can.
In the meantime, could you clarify one thing for me? When you plot your Relative Strength line, I'm assuming you're doing it from the industry tools menu and you're plotting RS versus the industry or sub-industry. Could you please confirm this?
Thanks again for using the Ask a Trainer forum.
- Doug
Teaching Online!
|
|
Registered User
Joined: 11/4/2004
Posts: 5
|
I am plotting the Relative Strength indicator (graph) from the indicator box or the indutry analysis dropdown menu (named as such on the TC quick reference card) and I am plotting the comparison to industry from the industry analysis menu dropdown box - first line directly under the stock symbol. In other words "YES."
SG
|
|
Administration
Joined: 9/30/2004
Posts: 9,187
|
1. I am unclear of the Relative Strength indicator graph meaning/interpretation when plotted on a price chart verse plotting the industry comparison (second line from top & clicking on plot industry comparison). First, when the RS indicator graph is higher than the price chart does that mean that the industry is outperforming the stock, The manual explanation (especially the last line on of it) seems to imply the opposite, i.e., if the industry is higher than the price chart the stock is outperforming the industry? Secondl, when I plot the industry comparison (second line from the top) there is no correlation with the relative streength graph? Also, when making the industry comparison visible dies it matter whether I do it by editing the price chart or by clicking on the industry group (second line form the top)?
---------------------------------------------------------
glazerps,
Plotting Relative Strength directly on the chart and plotting it from the Industry menu accomplish the same thing. The industry menu just automatically fills in INDUSTRY or SUB-IND as the comparision symbol. You could do the same thing by adding Relative Strength and typing in INDUSTRY or SUB-IND.
That being said, the interpretation either way is the same. As the help file states "If the active symbol is out-performing the comparison symbol, the relative strength line will be rising." Said another way, if the active symbol is out-performing its industry group, the relative strength line will be rising.
Looks like Doug is working on your question about the stochastics template from the Worden report and may have more to add on this subject as well.
|
|
Registered User
Joined: 11/4/2004
Posts: 5
|
My data (graph line) and that of tech support when done with me is that the relative strength indicator graph line and the industry comparison line when applied to the same price chart directly from the analysis drop down menu are uncorrelated? Looking forward to custom stochastics insight.
Thanx
SG
|
|
Administration
Joined: 9/30/2004
Posts: 9,187
|
I think maybe I misunderstood your original question.
----
You wrote: First, when the RS indicator graph is higher than the price chart does that mean that the industry is outperforming the stock, The manual explanation (especially the last line on of it) seems to imply the opposite, i.e., if the industry is higher than the price chart the stock is outperforming the industry? Secondly, when I plot the industry comparison (second line from the top) there is no correlation with the relative strength graph?
----
The Relative Strength indicator's position relative to the price graph doesn't mean anything becuase they are plotted on different scales. Only the direction of the RS graph and where it is relative to itself should be considered.
The Comparison Graph, compares the performance of the active and comparison symbols. When viewed on a log scale you get an accurate comparison of the two symbols on a percentage change basis.
|
|
Worden Trainer
Joined: 10/1/2004
Posts: 4,308
|
Dr. Glazer:
StockGuy has addressed your Relative Strength / Comparison Symbol question with regard to industry comparison. I am putting together a short video that I think will help illustrate his points. You can expect to see a link to the video here, most likely within the next 24 hours.
In this post, I would like to address the Stochastics issues you brought up related to the Worden Report of October 26.
In a nutshell, Sir Knowledgeable is suggesting a change to plotting Stochastics. Traditionally, Stochastics has an SK line, known as the fast Stochastics, and an SD line, known as the slow Stochastics. The SD line is really just a moving average of the SK line. Both the SK and the SD lines are based on closing prices.
Boiled down to its essence, Sir Knowledgeable is suggesting that we replace the SD line with a Stochastics line based on OPENING prices instead of closing prices (he calls it "Open Stochastics"). Normally, with SK and SD, you look for the SK to cross up or down through the SD. In this new custom Stochastics, you would look for the SK to cross up or down through the "Open Stochastics" line.
Now, he suggests that you write PCF formulas for each of these Stochastics lines. Actually, though, for his "Closed Stochastics", you don't need a formula. Just plot a normal Stochastics in TeleChart. Make the period 13, the SK period 3, and the SD period 1. With the SD period set to 1, the SD is a one day moving average of the SK...and so they are essentially the same line. Use the dotted line style, as he suggests. The line you will see is exactly the same line Sir Knoweldgeable plots with his formula as "Closed Stochastics". It just may be a little easier for you to plot it this way, rather than writing the formula.
For the "Open Stochastics", you WILL need to use his formula as a custom indicator, with a 3 day smoothing average, as he describes. Just make sure to use a different color.
At this point, you have two lines plotted for Stochasics, just like you normally would. The only difference is that the "Open Stochastics" line replaces the traditional SD line.
As far as the interpretation, and how to use this custom indicator setup for exit signals, I would suggest that you would use it exactly the same way you would use traditional Stochastics. There is much written about Stochastics and how to interpret its signals. When you're reading, anytime you see the SD line mentioned, just replace that in your mind with "Open Stochastics".
Because Sir Knowledgeable uses only a 3 day smoothing average, sometimes the lines are so close together, it is sometimes difficult to see the crossovers he speaks of. Perhaps if you zoomed in on the chart, you could see them more clearly.
Investors can find all sorts of ways to use Stochastics based on the settings they select. Sir Knowledgeable has essentially come up with a replacement for the traditional SD line that he believes tends to give earlier, and perhaps more reliable signals, according to his analysis. Try using Stochastics the traditional way on one chart template, and then Sir Knowledgeable's way on another chart template. Then you can decide for yourself which Stochastics makes the most sense to you.
There are many sources for information about Stochastics. If you use the internet, go to Google.com and search on Stochastics. In the meantime, here is a link to an article on Stochastics from a popular investing website called Investopedia.com. I hope you find it informative.
http://www.investopedia.com/articles/technical/073001.asp
- Doug
Teaching Online!
|
|
Registered User
Joined: 11/4/2004
Posts: 5
|
GREAT ANSWERS
THANX
SG
|
|
Worden Trainer
Joined: 10/1/2004
Posts: 4,308
|
Dr. Glazer:
Here is a link to the video I promised that explains and demonstrates the relationship between an Industry Comparison Symbol and a Relative Strength Line based on the industry.
http://www.worden.com/training/default.aspx?g=posts&t=186
I hope it helps clarify the use of these powerful tools. Please let us know if you have any further questions.
- Doug
Teaching Online!
|
|
Registered User
Joined: 11/4/2004
Posts: 5
|
Hi Doug H:
Superior video and response to my RS questions.
Thanx
Dr. Glazer
|
|
Registered User
Joined: 11/13/2004
Posts: 5
|
I have used TC2000 for a few years and am newly registered on Worden Studio. I am still learning the features and use of Worden Studio and am pleased to have this added feature from Worden. For example,I find the messages to Customer Training and the responses very helpful. The video and answers to Dr. Glazer's RS questions are excellent and very helpful.
Many thanks,
Ed Leite
QUOTE (glazerps) Hi Doug H:
Superior video and response to my RS questions.
Thanx
Dr. Glazer
|
|
Worden Trainer
Joined: 10/1/2004
Posts: 18,819
|
Mr. Leite,
Thank you for your kind words and for taking the time to share them.
- Craig
Here to Help!
|
|
|
Guest-1 |