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Stochastic timed entry - FOREX strategy

by REDtradera: This forex strategy works very well thanks to its entry timing. Position entry will be typically done later in the correction after its exhaustion. Position can be therefore liquidated faster, without staying in red numbers for a long time.

Strategy can be used in any timeframe, however I prefer 15 minutes chart due to lower entry costs (in 15 chart you need fewer pips to cover the stop loss).

Used forex indicators

  • Stochastic (10,6,6). Stochastic crossover in either overbought or oversold zone will provide me with primary signal.

  • Fractals. Indicator by Bill Williams. And one of my favorite. It will confirm the primary signal and set the stop loss limit.

  • Exponential Moving averages (100 and 50). Standard MA crossover is used to determine trend direction change. This tools alone can improve success rate for almost any forex strategy by about 10 – 20 percent.

Forex strategy rules:

For the best results, trade with professional ECN/STP broker with MT4. If you can't trade with profit. Automatically copy the traders that are already profitable.

SELL:

Faster EMA 50 trending below slower EMA 100. Downtrend can be confirmed. Only short trades can be entered.

Signal: Blue stochastic line crossing the red line downwards in overbought (above 70) zone. Bearish fractal is formed and closed.

Once the fractal closes we enter the trade short.

Stop loss is placed at the high price marked by the fractal.

Profit target: After the position reaches the profit distance that equals signal formations size. SL is moved to break even. Final take profit is then determined by.

  • A: EMA 50 crossing EMA 100 upwards.

  • B: Traders experience and expertise.

BUY:

Faster EMA 50 trending above slower EMA 100. Uptrend can be confirmed. Only long trades can be entered.

Signal: Blue stochastic line crossing the red line upwards in oversold (below 30) zone. Bullish fractal is formed and closed.

Once the fractal closes we enter the trade long.

Stop loss is placed at the low price marked by the fractal.

Profit target: After the position reaches the profit distance that equals signal formations size. SL is moved to break even. Final take profit is then determined by:

  • A: EMA 50 crossing EMA 100 upwards.

  • B: Traders experience and expertise.

Fractals closing: Second candle marking the closed fractal, must close after the Stoch cross in order to be considered valid.

Adding to winner: This strategy is ideal for adding to winner approach. Be careful about protection profits of previous position before entering another trade in the same direction. I personally place stop losses of all opened positions according to most recent signal. Also do not expect the price to move on forever. Often times it is better to exit early without risking opening another trade.

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