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Is Metastock mis-calculating stochastic oscillator???
Rank: Newbie
Groups: Registered, Registered Users, Subscribers Joined: 8/20/2010(UTC) Posts: 2
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I notice last week that Metastock calculates the stochastic oscillator differently than the standard formula. The discrepancy comes in when calculating the smoothing aka slow stoch. I put together a spreadsheet using data from NOK and my calculations didn’t match the results of the indicator used in Metastock. However, my result matched (exactly) the results I got from charts on E-trade and Google Finance.
Using stoch(5,3) here is what I discovered. The way I calculate this, and I assume E-trade and Google use the same method because of the exact results, is to first calculate the 5-day fast stoch. From these results I then calculate the 3-day simple moving average.
The way Metastock calculate this is by first calculating the 5-day fast stoch. After that it sums the numerator the last 3 days (of the fast stoch) and then divides it by the sum of the denominator of the last 3 days (of the fast stoch). I’m not 100% sure if this is the way Metastock calculate this because when I read the help on this topic it is difficult to follow. Here is a clip from Metastock help:
"The above example used a %K Slowing Period of 1 day (no slowing). If you use a Slowing Period of greater than 1 period, you would total the value of the numerators for the number of Slowing Periods, then total the value of the denominators for the number of Slowing Periods, and then perform the division. For example, to calculate a 10-day %K with 3-period slowing, you would sum the value of the numerators (i.e., today's close minus the lowest low in the last 10 periods) for each of the last three periods, then sum the value of the denominators (i.e., the highest high in the last 10 periods minus the lowest low in the last 10 periods) for each of the last three periods, and finally divide the sum of the numerators by the sum of the denominators."
Here is the formula that Metastock uses.
(Sum( C - LLV(L,5), 3 ) / Sum(HHV(H,5) - LLV(L,5), 3) ) * 100;
This is not the correct way to calculate the slow stochastic. Metastock results will never match the standard formula that’s used by everyone else. The two formulas are not the same.
Sum(a1 + b1 + c1) / Sum(a2 + b2 + c2) Sum(a1/a2 + b1/b2 + b1/b2) / 3
Could someone please tell me why this is?
Thanks
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Rank: Newbie
Groups: Registered, Registered Users, Subscribers Joined: 8/20/2010(UTC) Posts: 2
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Here is the fix for Metastock’s Stochastic Oscillator.
Paste the following in the indicator builder and give it name.
var1 := (C - LLV(L,5)) / (HHV(H,5) - LLV(L,5) ) * 100;
var2 := Sum(var1,3)/3;
var2;
Mov(var2,3,S);
80;
20;
Interpretation:
Var1 calculates five period %k (no slowing aka fast Stoch).
Var2 smoothes Var1 (%K(5,3)).
Plot Var2.
Plot %D(3) which is Mov(var2,3,s).
Plot 80.
Plot 20.
Done.
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Is Metastock mis-calculating stochastic oscillator???
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