Strategies for Stochastic Oscillator
Beginning to work in myforex currency market, beginners study fundamental market analysis, Elliott wave analysis, all kinds of technical indicators, and numerous graphic price behaviors. They are faced with such a huge amount of educational material and information that sometimes there is a lack of patience to study a carefully defined section of market trade. As a rule, superficial knowledge leads to constant losses of currency in the market, and sometimes to complete financial collapse.
What is the indicator?
The Stochastic indicator principle was developed by American trader and analyst George Lane. He noted that the price of the last closure is located near previous highs in the uptrend and near previous lows in the downtrend. By definition, the stochastic Forex indicator compares the current value of the asset price with the price range for the past time period. Today it is in the arsenal of trade instruments of many specialists of technical analysis. It defines currency overbought and resale zones with sufficient accuracy, thus pointing to places of possible trend reversal.
What does Stochastic consist of?
In order to trade according to Forex strategy for stochastic, it is necessary to first understand the peculiarities of the indicator. The indicator graph uses two lines: a fast curve, which is denoted by the symbol% K and sometimes called the main curve, and a slow curve, also called the signal curve, with the symbol% D. The main line shows the position of the last price of the asset from the highest price to the lowest price in the specified time interval. Curve% D is the moving average of% K. The value% K defines the number of bars received in the calculation. The other two setup windows assign the smoothness of the master parameter. By setting the indicator, you can set the percentage levels of stochastic values.
Interpretation of signals of the indicator
When making transactions on myforex using the strategy for the Ctochastic oscillator and the tactics of the corresponding execution of transactions based on the stochastic indicator, it is necessary to observe the following rules:
The purchase transaction is made when the curve of the graph (either% K or% D can be used) is below the indicated level (typically set to 20%) and then overcomes it upwards. Accordingly, the sale takes place if the curve, first above the indicated level (80%), crosses it down.
You should buy an asset if the% K curve is higher than the% D curve and you must sell it if the% K curve is lower than the% D curve.
There are moments when the price sets new highs, and the stochastic indicator does not overcome its previous peaks. In this case, you can expect a rapid trend change to the downstream direction and prepare to make deals for sale.
Overcoming the 80% upward level can be interpreted as a signal of a possible halt to price growth, or even a trend reversal. Overcoming the 20% level in the lower direction indicates a slowdown in the fall in the price, and the possible emergence of an upward trend.
forex trading strategy for Stochastic Oscillator
Idle time of stochastics
Strategy based on the intersection of% K and% D lines. Three levels - 20%, 80% and 50% - are displayed on the indicator chart. This binary options strategy is also suitable for other markets, including myforex.
Market entry is performed by indicator signal. A trader should enter a purchase if% K crosses% D from the bottom up and both lines are below 50%. A trader can sell an asset when% K crosses% D from top to bottom at more than 50%.
Exit from trade occurs when stop loss or teak profit levels are reached. The position is also closed when a new signal is received from the indicator. Stop loss is displayed at the most recent minimum on purchase or at the most recent maximum on sale. The size of the teak profile is equal to or 1.5 times the stop loss.
The shopping terminal opens two windows with Stochastic, which have different settings. Working with two indicators improves entry accuracy and reduces the risk of loss. In the first window the parameters have values characteristic of long time intervals - 21,9,9, and in the other window the indicator has short-term parameters - 9,3,3. Both indicators are set to 30% and 70%. Trading on a 15-minute chart is considered the most profitable.
The position opening signal is generated in two stages. In the first step, the signal is monitored in the window of the fast stochastic. Here,% K must cross% D from bottom to top at less than 30% to open a long position. The short position opens when lines% K and% D cross from top to bottom at above 70%. After receiving this signal, they go to the Stochastika window with long-term parameters. Exactly the same% K and% D line crossings at levels below 30% for purchase and above 70% for sale will be confirmation to make the deal.
A purchase/sale warrant is put up through 2-3 bars to the maximum/minimum of one of these bars. A warrant limiting losses is placed at the preceding minimum. The profit warrant must be 2 times the size of the stop loss. The transaction closes when stop loss or teak profit warrants are triggered, or when a new confirmation signal is generated.
Multi-frame strategy for stochastic
In it, the main trend is determined according to the daily schedule, and weekly trading system transactions will be posted according to the strategy on the hourly schedule. The parameters of the stochastic indicator on the daily chart are 34, 3, 9, and on the hourly chart are 5, 3, 3.
To open a purchase transaction, the daily chart% K is above signal% D and above 20%. On the hour chart, when lines% K and% D are crossed from bottom to top with a value below 20%, an asset is purchased. The position is closed when the lines cross in the reverse direction above 80%. The loss limit is set to the previous minimum.
To make a sale transaction,% K must be below the signal% D and be below 80% on the daily chart. When on the clock chart the main line crosses the signal line from top to bottom above 80%, the asset is sold. The position is held until the curves cross back. Stop loss is located at the level of previous maximum.
When choosing a trade strategy for Stochastik, first of all, attention is drawn to its profitability. No one needs a Forex strategy bringing a combined loss. The identity of the trader is also taken into account. If it needs a quick profit, then the strategy should be focused on short-term trade. If there is no time in front of the computer monitor, you need to find a strategy that works on a long period of time. But whatever strategy the trader chooses, it must first be tested not by real money, but virtual on a demo account.