Profitable Forex strategies for non-standard indicators 3
OnChart Stochastic – a strategy based on a modified stochastic
The mid-1950 is considered the date of the creation of the stochastic oscillator. According to legend (it is hardly possible to guarantee its reliability by 100%), the indicator was created by George Lane and was not originally intended for trading. The goal was to develop a formula that would allow calculating the amount of limestone in the smelting of iron ore to produce steel. By adjusting the formulas a little, we managed to get several oscillators, which subsequently gave rise to stochastics.
In terms of popularity, this oscillator could be called the top-end, but there is nothing ideal and several modifications have already been created:
- DS Stochastic. The version of the oscillator, where theoretically the delay problem should be eliminated by applying EMA smoothing.
- ADX + Stochastic_alerts. A combined indicator, where stochastic is combined with ATR and soundtrack (alerts) is added at the moment of signals to open and close a position.
- ZeroLag Stochs true. Another version of the oscillator with zero delays and signal amplification. According to the author, the indicator gives a signal of 2-3 candles earlier. But whether this is considered an advantage is a rhetorical question.
- DiNapoli Stochastic. Here, the DiNapoli smoothing system is applied, which removes price noise. How correctly this version works, I propose to evaluate it yourself. By the way, it is often combined with MACD.
- OnChart Stochastic. An interesting but controversial version that is convenient from a visual point of view. It has stochastic lines directly on the price chart. This is partly convenient, but the ability to track level crossing, which is a signal, disappears. An example strategy based on it is described below.
- asset – USD / CHF;
- timeframe – M15.
The indicator settings are visible in the screenshot below. You can find the template with basic settings.
Principles of opening a buy position:
- a declining candle closes below level 20 under Stochastic. That is, in the area of oversold;
- there is a reversal pattern consisting of several candles: the 1st or 2nd candle has a big shadow down, the second candle has a longer body, closes above the 20th level.
We open a deal on the next candle with a stop from 10 to 30 points. Close the position to achieve a profit of 20 points.
Principles of opening a sell position:
- a growing candle closes above level 80 above Stochastic. That is, in the area of overbought;
- there is a reversal pattern consisting of several candles: the 1st or 2nd candle has a large shadow up, the second candle has a longer body, closes below the 80th level.
If all these requirements are strictly observed, the number of signals will be small. Therefore, you can try to open deals on less obvious reversal patterns.
In no case do not run strategies immediately on the main account. First, learn how to quickly find signals on a demo account, and then, making sure of their effectiveness, try working in the real market. I hope you enjoy the strategies and look forward to your feedback and opinions in the comments.