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Overlay - Under the Hood
Hello All,
On the attached image, It shows the Full STO overlay on the PPO and the Full STO by itself. As you can see on the overlay, the Full STO does not retain its shape on the overlay. Does anyone know what is happening under the hood (Mathematically) with the overlay function?
Thank you!
On the attached image, It shows the Full STO overlay on the PPO and the Full STO by itself. As you can see on the overlay, the Full STO does not retain its shape on the overlay. Does anyone know what is happening under the hood (Mathematically) with the overlay function?
Thank you!
0
Answers
Probably has something to do with scaling the window, but I don't know why the order should matter. One difference I notice is that my version does not have a left-side scale (20-50-80).
Yes, it does have something to do with scaling. The version you posted is a simple min max scale. The version I posted is under Advanced Options and uses something in addition to a min max scale.
https://school.stockcharts.com/doku.php?id=technical_indicators:stochastic_oscillator_fast_slow_and_full
In your example, the Full Stochastic measures where the current reading of PPO is compared to it's five day range, and then double smooths it.
The Line and Signal hit the boundaries (0 or 100) and flatten out when PPO is at the extremes of its range within the time period represented by the parameter (5). Five bars is a short period, so if PPO continues to hit new highs (or lows) for longer periods, say ten or twelve bars, Line and Signal will get "pinned" to the boundary until PPO revereses.
The reason this doesn't happen on price charts is, the range is calculated using the highs and lows, but Line is calculated from the closes. Since the closes are rarely at the very highs or lows, Line rarely gets to 0 or 100.
The range on an indicator is calculated from the closing indicator value and Line is also calculated from the closing indicator value. So the closing indicator value will more often be at the extreme of the chosen range.