Stochastic Oscillator Trading Strategy

The Stochastic Oscillator strategy is an interesting system with a relatively low error rate. It is based on the standard Stochastic Oscillator, which shows the weakness of a trend. Therefore, the entry points in the Stochastic Oscillator strategy are mostly corrections, with comparatively safe stop-loss marks.

Advantages of this strategy

✔ easy to use

✔ only 1 standard indicator is used

✔ comparatively safe stop-loss brands

Disadvantages of this strategy

✖ Stop-loss brands are not ideal

Application of the strategy

The Stochastic Oscillator strategy should work with any currency pair.

  • Add the Stochastic Oscillator indicator to any chart.
  • Set the %K period to “14”, the %D period to “7” and slow down to “7”.
  • Use the MA method “Simple”.

When do I enter a trade with the Stochastic Oscillator strategy?

When the cyan line crosses the red line from bottom to top and both lines are in the lower half of the indicator, this is a buy signal.

When the cyan line crosses the red line from top to bottom and both lines are in the upper half of the indicator, it is a sell signal.

Set the stop-loss to the short-term low if you go long and to the short-term high if you go short.

When do I exit a trade with the Stochastic Oscillator strategy?

A rule of thumb for this strategy is to set the take profit at 1-1.5 times the stop loss.

If a new signal is generated before the Stop Loss or Take Profit is reached, close the position

Example:

As you can see from the example above, 4 trading signals were generated. The stop-loss marks are marked with orange lines. The 1st signal is a buy signal with tight stop loss. This trade could have been closed in profit. The 2nd signal is a sell signal which would have run into the stop-loss. But since the stop-loss was set very tightly, the loss here would not have been dramatic. The third signal was a buy signal. This trade could have been closed in profit. The 4th signal was again a sell signal which could have been closed in profit.
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Ideally, buy and sell signals should always alternate. However, since it also happens that wrong signals are generated (buy signals in the upper half and sell signals in the lower half of the indicator), this is not always the case.

Warning:

The use of Forex strategies is at your own risk. Broker-Bewertungen.de makes these available to its visitors free of charge and is not responsible for any losses that may occur through the use of the Forex strategies. Please test all strategies thoroughly on demo accounts before using them on a real money account.


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