Stochastic oscillator is a familiar indicator to find overbought and oversold area of the market price. This trading strategy is based on this default indicator of the mt4. This strategy gives sell signal from overbought area and buy signal from oversold area.
1. Stochastic indicator Click here for Stochastic indicator setup process
Buy Entry Setup Rules:
✔Market price need to stay on oversold area.
✔Stochastic indicator needs to start in upside from 20 level.
✔At the same time, candle should be bullish.
✔After finishing the bullish candle, place buy entry.
Sell Entry Setup Rules:
✔Market price need to stay on overbought area.
✔Stochastic indicator needs to start in downside from 80 level.
✔At the same time, candle should be bearish.
✔After finishing the bearish candle, place sell entry.
Example of Buy & Sell Setup:
In the above chart of GBPUSD H4, we can see market started falling from overbought area and moving up from oversold area. In this example, we can see 6 examples and all were profitable.
All time frames.
Take profit and stop loss:
Take profit depends on time frame. TP will be 50-200 pips for higher time frame.
Stop loss can be set as 30-60 pips. You can set Stop loss on swing high or low
This strategy can be used on ranging mode. You will get good result from on range market using this simple strategy but need to be careful on trend market. You must use money management rules for using this strategy on your live account.
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