Rules as suggested by Mr.Lee:
For long trades:
(1) Premier crosses below 0.90
(2) premier crosses below 0.20
For short trades:
(1) Premier crosses above -0.90
(2) premier crosses above -0.20
More info on the trading zones and other nuances:
// // @author LazyBear // study("Premier Stochastic Oscillator [LazyBear]", shorttitle="PSO_LB") stochlen = input(8, title="Stoch length") smoothlen = input(25, title="Smooth length") sk = stoch( close, high, low, stochlen) len = round(sqrt( smoothlen )) nsk = 0.1 * ( sk - 50 ) ss = ema( ema( nsk, len ), len ) expss = exp( ss ) pso = ( expss - 1 )/( expss + 1 ) plot( pso, title="Premier Stoch", color=black, linewidth=2 ) plot( pso, color=iff( pso < 0, red, blue ), style=histogram ) plot(0, color=gray) plot( 0.2, color=blue, style=3 ) plot( 0.9, color=blue) plot( -0.2, color=red, style=3) plot( -0.9, color=red )
Outer Threshold Setups
Outer threshold setups form when the PSO crosses out of the outer limits and then returns. As previously mentioned, price has a tendency to pullback and then return to overbought or oversold areas. This can provide a good entry point to:
Go long when the PSO crosses below the upper threshold (0.9 in this example) after it has already crossed above the threshold. A short-term reversal may occur where price returns to the extreme overbought territory.
Go short when the PSO crosses above the lower threshold (-0.9 in this instance) after it has already penetrated the lower threshold. Again, a short-term reversal may occur as prices make another push lower.