Forex brokers comparison

Forex trading strategy #3 (Stochastic High-Low)

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.

What signal may be used with stocastic to eliminate entering on false signals?

You may add trend lines to the chart. They will help to eliminate majority of false signals.

While a trend line remains intact there is no change in the trend, therefore Stochastic signals should be ignored.

Once the trend line is broken and Stochastic also signals of a trading opportunity - that would be the right time to place a new order.


schocastic show as a good entry and exit when the market has been overbought and oversold.

Hi Edward,
what does %K and %D represent on the Stochastic indicator, and which of the histograph is main and signal?

In simple words, Stochastic oscillator uses two lines: %K - a fast line and %D - a slow line.

%K line is calculated using the most recent close, the highest high over the last X days and the lowest low over the last X days.

%D line is a Y period moving average of %K

General rules can be described as follows:

Signals to Buy and Sell occur when %K crosses above or below %D.
Reading above 80 suggests an overbought market and reading below 20 - oversold.


Where do i put the stop loss?

Try placing a stop loss above (downtrend) / below (uptrend) the previous daily candle.


if it does not go past 10, maybe 15 and cross 20, can i still buy? Can i use William Percent range as a guide to Stochastic ?