Spuds Stochastic Thread Theory - MT4/MT5 Resources
Until I was lucky enough to have a moderated forum, I have been very reluctant to share the following information because it would undoubtedly be very confusing if I included it in a single thread. It’s also a lot of work, and it’s not too much work for me. However, continuing to hold on to this knowledge won't help you...so I decided to post it now.
I will warn you, this is a theory that requires a lot of thought and attention to detail. To trade correctly, you first need to understand some or all of the patterns and what they mean, and then make sure that the pattern is the pattern. I also said that I believed I had about 70% of it figured out, so that's why I called it a theory. The last 30% I haven't figured out yet is trading with small reversals...which doesn't hurt me but creates more work during the trade.
The good news is that I will start by explaining some simple basic patterns that are very easy to see... you can even see some of them cold drunk (not that I am suggesting trading this way). Simple patterns don't appear very often, so knowing how to trade all patterns will definitely improve your entry and exit success rates. However, if a simple pattern emerges... might as well trade it, duh!
I'll start with simple patterns so you can see the patterns for yourself.
Random thread theory was originally formed by the extension of Escalator to Pips. The theory is that if 4 time frames line up, what will happen if there are 18 random lines on a single time frame?
To do this, we trade on only one chart. I recommend 1H or 4H as we want to take advantage of larger spread movements over time. I prefer the 1H as it suits my patience level better. I recommend starting with 4H as you will have more time to work on the threads on shutdown. Time frames of 30M or less will be difficult to trade because they don't leave much time for thinking.
To set this up we need a 1H chart and 18 random %K lines from 6 to 24...so 6,7,8,9,10,11,12,13,14,15,16,17,18,19,20,21,22,23,24 all in one indicator window. (So each stoch is 6,3,3; 7,3,3 etc.)
Colors 6 to 13 Thin Blue - These are our lower timeframe stochastics and will be called LTFS (lower timeframe stochastics).
Color 14 Rich Red - 14 plays an important role, after seeing this you may understand why I switched to 14,3,3. This is our basic stochastic indicator, naturally called the BS line. So when we're done, we can say, "That damn bullshit screwed me up!" Honestly.
Colors 15-24 are the thin red lines called HTFS (Higher Time Frame Stochastic)
Just in case you were wondering, this is the MTF stochastic indicator, it just doesn't use a different price chart, but a different stochastic period.
You should have a nice rainbow on your chart, as shown in the image below.
I will warn you, this is a theory that requires a lot of thought and attention to detail. To trade correctly, you first need to understand some or all of the patterns and what they mean, and then make sure that the pattern is the pattern. I also said that I believed I had about 70% of it figured out, so that's why I called it a theory. The last 30% I haven't figured out yet is trading with small reversals...which doesn't hurt me but creates more work during the trade.
The good news is that I will start by explaining some simple basic patterns that are very easy to see... you can even see some of them cold drunk (not that I am suggesting trading this way). Simple patterns don't appear very often, so knowing how to trade all patterns will definitely improve your entry and exit success rates. However, if a simple pattern emerges... might as well trade it, duh!
I'll start with simple patterns so you can see the patterns for yourself.
Random thread theory was originally formed by the extension of Escalator to Pips. The theory is that if 4 time frames line up, what will happen if there are 18 random lines on a single time frame?
To do this, we trade on only one chart. I recommend 1H or 4H as we want to take advantage of larger spread movements over time. I prefer the 1H as it suits my patience level better. I recommend starting with 4H as you will have more time to work on the threads on shutdown. Time frames of 30M or less will be difficult to trade because they don't leave much time for thinking.
To set this up we need a 1H chart and 18 random %K lines from 6 to 24...so 6,7,8,9,10,11,12,13,14,15,16,17,18,19,20,21,22,23,24 all in one indicator window. (So each stoch is 6,3,3; 7,3,3 etc.)
Colors 6 to 13 Thin Blue - These are our lower timeframe stochastics and will be called LTFS (lower timeframe stochastics).
Color 14 Rich Red - 14 plays an important role, after seeing this you may understand why I switched to 14,3,3. This is our basic stochastic indicator, naturally called the BS line. So when we're done, we can say, "That damn bullshit screwed me up!" Honestly.
Colors 15-24 are the thin red lines called HTFS (Higher Time Frame Stochastic)
Just in case you were wondering, this is the MTF stochastic indicator, it just doesn't use a different price chart, but a different stochastic period.
You should have a nice rainbow on your chart, as shown in the image below.
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