Forex trading strategy #3 (Stochastic High-Low)
Submitted by Edward Revy on February 28, 2007 - 13:54.
Forex systems which adopt a Stochastic indicator for monitoring the price provide some very good tips about the situation on the market for traders that are willing to see it.
Currency pair: Any.
Time frame: Any.
Indicator: Full Stochastic (14, 3, 3)
Entry rules: When Stochastic has crossed below 20, reached 10, and then crossed back up through 20 – set BUY order.
Entry rules: Sell when Stochastic has crossed above 80, reached 90, and then crossed back down through 80.
Exit rules: close trade when Stochastic lines rich the opposite side (80 for Buy order, 20 for Sell order).
Advantages: gives quite accurate entry/exit signals in well trending market.
Disadvantages: needs periodical monitoring. Stochastic is suggested to be used along with other indicators to eliminated entering on false signals.