Stochastic Indicator Forex Strategy

The stochastic indicator forex strategy is a strategy that allows traders to examine the closing price of an asset in comparison to its price range over s specified timeframe.

The strategy combines the Stochastic indicator and the buysellarrowscalper.ex4 custom indicator in delivering its buy and sell signals.

Chart Setup

MetaTrader4 Indicators: Stochastic Indicator.ex4 (15, 13, 13), buysellarrowscalper.ex4 (default setting)

Preferred Time Frame(s): 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours, Daily, Weekly

Recommended Trading Sessions: Any

Currency Pairs: USD/CHF, EUR/USD, USD/JPY, GBP/USD, AUD/USD, USD/CAD, NZD/USD, EUR/CHF, GBP/JPY, EUR/JPY

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Buy Trade Example

Fig1.0

Strategy

Long Entry Rules

Enter a buy in the market if the rules or conditions hold true:

  1. If the Stochastic Indicator crosses within the oversold region and breaks out above the zone i.e. the 20.000 level, a bullish trend is said to be triggered. The oversold region is region that holds zero to 20.000.
  2. If the buysellarrowscalper.ex4 custom indicator forms a DodgerBlue upward pointing arrow that is aligned below price bars, while a DodgerBlue line that has lower spikes forms a line beneath price bars as well, an indication that price is bullish i.e. a buy signal.

Stop Loss for Buy Entry: Place stop loss below immediate support.

Exit Strategy/Take Profit for Buy Entry

Exit or take profit on position(s) if the following indicator/chart patterns are in display:

  1. If the %K line (red dotted line) from above crosses %D (Aqua line) line of the Stochastic indicator downwards, it is an indication of an exit or take profit trigger. Seemingly, you decide to exit or take profit when the Stochastic indicator breaks below the 80.000 mark as shown on Fig. 1.0.
  2. An exit or take profit trigger is issued from the buysellarrowscalper.ex4 custom indicator when a red downward pointing arrow is formed above price bars.

Sell Entry Rules

Enter a sell in the market if the following conditions or rules hold true:

  1. If the Stochastic Indicator crosses within the overbought region and breaks out below the zone i.e. the 80.000 level, a bearish trend is in focus. The overbought region is region that holds zero to 100 – 80.
  2. If the buysellarrowscalper.ex4 custom indicator forms a red downward pointing arrow that is aligned above price bars, while it continues to draw a red line that has upper spikes aligned above price bars, a trigger to sell is confirmed.

Stop Loss for Sell Entry: Place stop loss above immediate resistance.

Exit Strategy/Take Profit for Sell Entry:

Exit or take profit on position(s) if the following conditions are in place:

  1. If the %K line (red dotted line) from below crosses %D (Aqua line) line of the Stochastic indicator upwards, it is an indication of an exit or take profit trigger. Seemingly, you decide to exit or take profit when the Stochastic indicator breaks above the 20.000 mark as seen on Fig. 1.1.
  2. An exit or take profit trigger is issued from the buysellarrowscalper.ex4 custom indicator when it forms a DodgerBlue upward pointing arrow.

Fig 1.1

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About The Trading Indicators

The Stochastic Indicator is a momentum oscillator that is attributed to George Lane.

The indicator is made up of two lines, the %K fast line and the %D slow line, while it oscillates between 1 and 100.

Essentially, the Stochastic gauges the relationship between an assets closing price and its price range over a specified time period.

The Buysellarrowscalper.ex4 custom indicator is a trend following indicator that changes its color between a red downward pointing arrow (with upward spikes place on its red line) aligned above price bars to depict a bears market and a dodgerblue upward pointing arrow (with downward spikes place on its dodgerblue line) aligned below price bars to trigger a buy market.

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