Stochastic Trading Strategy – Perfect For Beginners
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This stochastic strategy aims to catch the beginning of new strong trends (even if they are micro-trends) that produce a vast amount of pips in a short period of time.
The combination of strong move followed by a very shallow (tight) correction, is usually a signal that price has more to go in the original direction as the trend is very strong at the moment.
Our goal and idea is to get on board during that correction and ride the second wave.
STOCHASTIC STRATEGY RULES
► Time Frame: H1 and above.
► Instrument: Any (fx, stocks, commodities, indices).
► Required Knowledge: How to plot Fibonacci retracement & stochastic.
1. Wait for the price to break above a recent high or low and to get inside an OB or OS zone.
2. Wait for a cross over against the breakout direction (potentially a correction starts) and plot Fibonacci retracement tool between the most recent swing high and low.
3. If stochastic reaches the opposite extreme zone and price still didn’t reach 38,2% retracement when it crosses back and gives a bullish/bearish candlestick enter a trade.
► Stop Loss
1. A more aggressive approach for the stop loss is right below the last low (buy) that was created (or above the last high created for a sell). This way you will have an amazing risk vs reward ratio.
2. Conservative stop loss would be below 38,2% Fibonacci when buying and above this level when selling.
Target 1 – always aim to collect the first target when the price has reached 1:2 risk:reward ratio.
What that means is, if your stop loss is 50 pips, when the trade is in positive 100 pips (twice as much the stop loss), close the first part. That could be anywhere from 50% up to 80% of the initial lot size that you have used. For example, if you have used 1 lot, when you reach target 1, close 0,5 lots up to 0.8 lots and leave the other part running. Once you collect profits at target 1 move your stop loss to break even to free the risk of the trade.
Target 2 – measure the distance of the entire first wave, that would be the move where you have plotted the Fibonacci retracement tool. Project that amount of pips starting from the beginning of the correction to get target 2.
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Stochastic Crossover Signal, Stochastic Trading Strategy – Perfect For Beginners.
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This determines whether the time frame needed is hourly, day-to-day or yearly. What it means is that when an existing trend ends, a new trend begins. The technical analysis needs to likewise be identified by the Forex trader.
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They do this by getting the ideal responses to these million dollar concerns. EMA-stands for Exponential Moving Average.When a stock closes above its 13 and 50 day EMAs this is a bullish signal. Which’s how professional traders live their lives.
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Use another indicator to confirm your conclusions. If the resistance and the supportlines are touching, then, there is likely to have a breakout. And if this is the Stochastic Trading situation, you will not have the ability to presume that the price will turn once again. So, you might just want to set your orders beyond the stretch ofthe resistance and the assistance lines in order for you to capture a happening breakout. Nevertheless, you should use another indicator so you can confirm your conclusions.
Do not predict – you must only act upon verification of cost changes and this constantly indicates trading with rate momentum in your corner – when applying your forex trading method.
Remember, you will never offer at the precise top because nobody understands the marketplace for particular. You ought to keep your winning trades longer. However, if your technical signs go against you, and the patterns start to stop working, that’s when you ought to offer your stock and take Stochastic Trading revenue.
The key to using this simple system is not simply to look for overbought markets however markets are really Stochastic Trading overbought – the more a market is overbought, the bigger the move down will be, so be selective in your trades.
When the break occurs, put your stop behind the breakout point and wait till the move is well underway, before trailing your stop. Do not put your stop to close, or within typical volatility – you will get bumped out the trade.
It takes perseverance and discipline to wait on the right breakouts and after that much more discipline to follow them – you need self-confidence and iron discipline – however you can have these if you wish to and soon be stacking up triple digit profits.
This means minimising your possible loses on each trade utilizing a stop loss. This everyday charts technique can make you 100-500 pips per trade. And in a drop, link two higher lows with a straight line.
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