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This is a simple stochastic trading strategy. This strategy can be used in any time period. So this is suitable for scalping trade. Beginners can follow this simple strategy. You will get many signals from this strategy. You can earn big pips every month with this trading system.
Stochastic Oscillator Strategies For Forex Market Entry
You have to find the buy signal when the stochastic indicator remains in the oversold zone. The 20 level of this indicator indicates the oversold area. When a crossover occurs at level 20, you can buy. You can wait for a bullish candle to confirm your buy entry.
How Does The Stochastic Indicator Work For Trading?
You have to find the sell signal when the stochastic indicator remains in the overbought zone. The 80 level of this indicator indicates the overbought area. When a crossover occurs at level 80, then you can sell. You can wait for a bearish candle to confirm your sell entry.
Take profit and Stop Loss: Take profit will depend on the time period. Made short profit for scalping trade. If you trade on H1 or H4, you can set a profit of 50-80 pips.
You have to set the stop loss below the swing low for buy entry and above the swing high for sell entry.
Risk Warning: This strategy is based on only one indicator. So you may need candle confirmation for security trade. You should not trade the market with this strategy. In newstime, you have to avoid this strategy. You should trade in this strategy at your own risk. You must follow money management. In this strategy, you need to take 1-2% risk only for each trade. Although this is a simple trading system, you need to practice this strategy on your demo account before using it on the real account.
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Windows 2012R2/2016 | Server Location Amsterdam, France, Canada | Low latency of the runners| Super fast trading experience | All EA types supported | 3-Day Money Back Guarantee Since its development (in the early 1950s) by financier George Lane, this oscillator has not only helped make money, but has also saved millions of traders from going bankrupt. The task of the group of indicators under the general name Stochastic is to look for reversal situations to enter the market with a new trend or close positions in time.
The Stochastic Oscillator shows the position of the current price in relation to the range over a certain period and helps to “see” the moment when the balance of sellers/buyers breaks down in the market and the price of an asset is ready to change its direction.
No matter what asset you trade and how you do it, today (of course, if you respect technical analysis at least a little!), it is difficult to avoid using (with varying degrees of reliability) any of the versions. of this classic tool.
The Stochastic Oscillator is a typical price rate momentum indicator (like RSI or WPR). It determines the market velocity by a relative position of the closing price in the max/min range for a given period. As a result, the trader gets the probability of updating the extreme price, that is, he can assess the possibilities of continuation of the trend (see What is the stochastic oscillator).
Simple Trading Strategy Of Stochastic Indicator
The author’s trading idea is as follows: in an uptrend (uptrend), the closing price of the current time period should be in the area of the previous high (for the billing period); in a downtrend, the closing price should stop in the area of the previous min.
Stochastic is believed to be more accurate than the Williams %R line as it contains several steps to correct for market noise and suppress ‘false’ signals.
The value of the indicator in the range of 70 to 100 means that the market is overbought; if the value is 30 (and below) – the market is oversold. In critical areas, the indicator decreases: the leading group of players weakens, and if a stochastic reversal occurs, the probability of price movement in the opposite direction increases.
The direction and character of the behavior of the indicator lines show how strong the price impulse can be. If the value is about 50 − there is no tendency to change the trend.
Slow Stochastics Strategies, Calculations & Diff Btwn Rsi
In the basic version, the stochastic oscillator indicator consists of two lines: a ‘fast’ stochastic %K (it’s a solid line by default) and a ‘slow’ stochastic %D (dashed line).
It is believed that for most trading assets with an average level of volatility, the SMA smoothing method shows the most stable results, while for high volatility assets, the EMA method is preferred, and for stock assets, the EMA of a typical sometimes the price method is applied. The value range (in %) is 0 to 100.
Traditionally for this type of indicator, the stochastic oscillator is placed under the price chart in a separate window with a scale of values (0;100). In addition to the main lines, there are also two basic levels: 80(70) for the overbought area and 20(30) for the oversold area, and a balance line (50).
The most important parameter is the number of bars for the calculation, the others only determine the degree of correction of the %K and %D lines. In the standard version of the indicator, there is an additional smoothing parameter that serves to use a certain number of K% values to further smooth the indicator.
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For example, if the value of the deceleration parameter is 3, only the last 3 K% values (averaged into one value) will be used to generate the K% line.
Today, the parameters recommended by George Lane (the period from 9 to 21) should not be considered as the definitive ones; it is better to choose for yourself. The default setting (5/3/3) works quite effectively for monetary assets, although the optimal parameters are believed to depend on the time frame.
The longer the time period, the shorter the calculation period of the main line. Therefore, in the time periods up to M30, you can choose the period 9-13, in the period H1, the parameters (13/5/3) work well, and in H4 and above – the period 5-9 is preferred. By the way, to look for divergences and control critical zones, it is recommended to use different parameters, read more about it below.
The longer the period of the indicator, the less sensitive it becomes to insignificant market fluctuations and the more sluggish it will be. Like any oscillator, Stochastic gives the most reliable signals in periods of H4 and above.
Tdi And Stochastic Strategy
Changing the boundaries of critical areas should also be done with caution. Reducing the level above 70 or raising the level below 30 increases the number of possible trading signals, but their credibility is reduced.
Increasing the smoothing parameters will make the indicator reach the extreme areas faster and stay longer in the critical areas. This will allow you not to miss any serious changes in the trend.
If you reduce the smoothing parameters, the main lines will be in the central area much longer, which is favorable for long-term trading. But reversal trade signals will appear much less frequently.
Before using the stochastic oscillator, we remind you that its trading logic is similar to standard momentum indicators. Stochastic is considered to give the following types of signals.
Bb+stochastic Reversal Strategy
When there is a break of the 80 (70) overbought level in the uptrend, it is considered the first sign of the stop of the growth and (maybe!) a turn to the downside.
When the main line crosses the 20 (30) level in the downtrend, it is a signal to stop the decline and a possible upward turn.
It is recommended to pay attention to the form of the reversal in the overbought/oversold zones: if a sharp edge is obtained, the movement after the turn will be strong and fast, and if the turn occurs after the flat period in the critical zone. – will be weaker.
If the lines of the indicator only enter the critical zone (below 20 or above 80), then it is better to avoid transactions; only exiting the zone after a turn can be considered a trading signal.
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Strong (but rare!) trend reversal signal. Even if such a situation is visible, it is necessary to analyze the intersection of the lines and the behavior of the indicator in the critical areas to make a decision (see Use of graphical tools). Then:
The central line of the stochastic is a border between the bull zone (50-100) and the bear zone (0-50). If the indicator is near the 50 level (the price is near the middle of the range), then there is uncertainty in the market. If, after crossing the balance line, the stochastic continues to move up, then the bulls become stronger; if they go down, then the bears get stronger.
Practice shows that the price reaches at least the middle line after a turn from the critical zone. Situations where the price returns without reaching the equilibrium line are extremely rare.
If the stochastic is stably located in the range of 100 to 50, then there is an uptrend
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