|  OCT 1995

V13:10 Letters to S&C

LETTERS TO S&C OVERBOUGHT/OVERSOLD LIMITS Editor, I'm new to the markets, technical analysis and SuperCharts. I'm constantly agonizing over where to set my overbought and oversold limits. What I would like to do is shift them up in a clearly definable uptrend and shift them down in a clearly definable downtrend. Presumably, then, an indicator such as stochastics wouldn't take me out of the market prematurely. Is my logic sound or dangerous? Should I shift or spread my overbought/oversold levels? For example, subsequent to a long position, should I shift my oversold 25 and overbought 75 levels to 30 and 80, respectively, or should I spread my oversold 25 and overbought 75 levels to 20 and 80, giving consideration to volatility? Also, how could this be written in EasyLanguage (the programming language developed by Omega Research for its TradeStation and SuperCharts programs) so it would be done automatically and I could backtest it? I thought you might have some good ideas to set me straight. Thank you. BRAD GREENE Missoula, MT Your logic appears to be sound. Test your ideas and let us know your results!--Editor

by Technical Analysis, Inc.