Article by Investazor.com
The strategy that we propose it can be used for trading on the trend but also in the range. It doesn’t matter on which currency it is applied or time frame, but from our back testing it seems to be working better on the one hour charts.
The strategy uses a Stochastic Oscillator with 14, 3 and 3 periods. Beside the well-known levels of 80 and 20 that are used with this oscillator, must be added also 90 and 10. First step would be to identify the trend, this it can be used the price action (looking for the higher highs/higher lows or lower highs/lower lows) or a slow moving average.
In the next example we will use a down trend, but the strategy can be used for up trends and range, when the trend is down the trader should take into account only the selling signals. The signal is a crossover of the Stochastic above the (or touches) 90 level. The confirmation comes when the Stochastic falls back under 80.
The entry point for this strategy is on the next candle after the Stochastic dropped under 80. The Stop Loss is to be set above the high, made by the price. The first exit point of this strategy is when the Stochastic touches the 50 level and the second, and mostly use, when the Stochastic touches the 20 level. (On an ascending trend, everything is mirroring.)
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