Our Philosophy

Advanced numerous applications for his stochastic indicator; I have, through persistence, considerable research, and the "school of hard knocks" amplified on George Lane's original research. In fact, George has adapted at least one of my uses of stochastics, the stochastic pop indicator, to his own use.

Simply stated, the SI is a price oscillator which compares today's price behavior with the behavior of prices x number of periods ago.

A 14-day SI, for example, compares a derivative of today's price with price 14 trading days ago. The raw stochastic number is converted to a percentage reading, smoothed, and then compared to a moving average of itself. Hence, the SI consists of two numbers expressed as percent at each price bar.

Since both lines are smoothed, and since one line, percent D is a derivative of percent K (usually a 3-period moving average of the first-line percent K) the visual effect is one which easily shows highs and lows in the SI correlated closely with highs and lows in price.

There are two forms of the SI, fast and slow. The fast SI consists of two lines which often gyrate wildly from low to high and back again, and the slow SI is a smoothed version of fast and moves more gradually from low to high and back again.

There is a strong correlation between tops and bottoms in price and SI tops and bottoms. The SI is, therefore, a powerful indicator which may be used by short-term, position, and day traders alike. The important issue regarding the SI, whether fast or slow and whether 9-period or 25-period, is its method of application.

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