Super Tactics to Profit with the Stochastic Oscillator

The Stochastic Oscillator technical indicator is a great Forex indicator t/hat was made public by the famous technical analyst George Lane at the late 50s. It is worth noting that this technical indicator is still used to this day by dozens of traders worldwide. This article will present you how to make profits with Stochastic Oscillator for great gain in any Forex pair and any stock.



The Stochastic Oscillator shows the location of price in relation to local high and low of the last 5 bars (by default). As a conclusion, when it is at its oversold values it means that price is at a support level, and when it is on high level it is at proximity to a resistance level (and may go down). It is suggested to confirm these signals by price-action, to confirm that the price is actually on a support or a resistance level.



One method of trading the Stochastic Oscillator is the overbought\oversold technique. When this indicator crosses the overbought level (usually 80) downwards it is a sign that the bull trend is at its end and it is the time to sell. When the indicator index touches the oversold level (usually 20) upwards it is a buy signal and a sign that an bull trend is about to begin. The idea behind this system is that when the price bounces off support or resistance level and begins to reverse, we join the trend and profit from it. It is recommended to use another Stochastic Oscillator with a longer period of calculation, to confirm the trend direction and make the signals more accurate. Another advantage of this system is the fact that it works with a small stop loss.



Another trading system that uses this oscillator is the middle-line cross. When the index crosses the middle-line (level of 50) from above it is a sell signal and when it touches it from below it is a buy signal. This is the ordinary trend-following system that is late but may work profitably at markets that have long trends.



Another trading technique is the the POP technique – the idea behind it is exactly the reverse. The basis of this trading tactic is to enter buy trade when the Stochastic index crosses 70, and sell trades when it goes below 30. Trades are closed when the Stochastic crosses the overbought (for long trades) or the oversold (for sell trades). This trading tactic performed well at the 70s and 80s and works to this day on pairs that trend strongly like the GBP\USD.



We recommend putting the stop loss 1 pip below the lowest low of last 4 candles (for short trades), and 1 pip above the highest high of last 4 candles (for buy\trades), so your risk is kept to minimum and the profit is big. This system works exceptionally well with the overbought\oversold trading technique. As usual, it is recommended not to risk more than 1-2% of your account on any single trade, this is standard capital management tactics that are commond regardless of your trading system.



In conclusion, the Stochastic Oscillator is a accurate indicator that created profits for the last 65 years and should continue to perform this way for years to come. Learn to use and master this FX indicator, as it can highly improve your trading strategy and win rate



Optimize your trading system and master the best Forex indicator you can use in any pair and any stock!