Stochastic Oscillator Forex trading
strategy — it's an interesting system with a
rather low fail rate. It's based on a
standard Stochastic Oscillator indicator, which signals
a trend fatigue and change. That means
that you will almost always enter on pull-backs,
guaranteeing rather safe stop-loss
levels.
Features
• Simple to follow.
• Only one standard indicator used.
• Safe stop-loss levels.
• Take-profit level isn't optimal.
Strategy Set-Up
1. Any currency pair and timeframe
should work. But longer timeframes are
recommended.
2. Add a Stochastic Oscillator
indicator to the chart, set its %K period to 14, %D
period to 7 and slowing to 7, use
Simple MA method.
Entry Conditions
Enter Long position when the cyan line
crosses the red one from below and both are
located in the bottom half of the
indicator's window.
Enter Short position when the cyan line
crosses the red one from above and both are
located in the upper half of the
indicator's window.
Exit Conditions
Set stop-loss to the local maximum if
going Long and to the local minimum if going
Short.
The most comfortable level for
take-profit is between 1 * SL and 1.5 * SL.
Close position immediately if another
signal is generated.
Example
5 signals for this
strategy can be seen on the example chart above. All stop-loss levels
are marked with the
yellow horizontal lines on the chart. The first signal is for Short
position with a close
stop-loss; take-profit is achievable here. The second one is a
bullish
signal, which turns out
to be a wrong pull-back, but, fortunately enough, the stop-loss is
quite tight here. The
third signal is not a signal actually, because it's a bearish figure
cross that appears in the
bottom half of the window and thus is disregarded. Fourth
signal is bullish with a
stop-loss quite far away, but even the most aggressive take-profit
level would work here.
The final signal is for Short, with tight stop-loss and a lot of
place
for a rather profitable
TP setting.
Ideally bullish and
bearish signals should follow one after another but due to the
occurrence of the false
signals (bearish in the bottom half and bullish in the upper half of
the window) it's not
always so.
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| Stochastic Trading |
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