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The Kase Permission Stochastic validates trades. Trades taken in the direction of a major trend tend to be more successful than trades taken against the trend. Therefore it seems appropriate for traders to screen trades with a higher time frame filter.
Traders are often too impatient to do so. Thus, the Kase Permission Stochastic computes a synthetic higher time frame stochastic, which is based on a moving higher time frame window that ends with each bar. For example, a weekly bar is defined as the last 5 business days, ending today.
The sped up filter is therefore the best compromise between filtering in a higher time frame and minimizing delays in trading.
Interpretation
Permissioned traders may take long trades when the Permission Stochastic is riding the top of the chart and when Permission K is above Permission D and both are close together. The opposite applies to short trades.
Traders are also permissioned long when the market has been oversold. The difference between Permission K and Permission D is large and Permission K has already turned up. Again, the opposite applies to permissioning short trades.
Rules
Permission To Go Long:
When the stochastic
values are near the top of the chart and close in value.
When the Permission
Stochastic values have been near the bottom of the chart, Permission K
is both well above the Permission D and above (or has risen out of) oversold
territory.
When the Permission Stochastic values are both below 85 percent and above 15 percent and Permission K is above Permission D.
Permission To Go Short:
When the Permission
Stochastic values are near the bottom of the chart and close in value.
When the permission stochastic values have been near the top of the chart, Permission K is both well below the Permission D and below or has fallen out of overbought territory.
Parameters
The Kase Permission Stochastic is designed to validate trading positions via an easy to understand indicator. Therefore, the parameters for this stochastic are correspondingly simple.
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Field |
Function |
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Period |
The description field lists the available study elements. There are two study variables in the Kase Permission Stochastic:
Period indicates the number of bars used to calculate the standard deviations for each variable used in the Kase Permission Stochastic. The default is 9.
Multiplier is ?. The default is 5.
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Color |
Enables you to adjust the color of the two study elements:
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Graph |
Enables you to adjust the rendering method of the two study elements:
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Line Style |
Two elements are rendered indicators:
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Line Width |
Two elements are rendered indicators:
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