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Stochastic system

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  • First Post: Jun 6, 2008 5:36pm Jun 6, 2008 5:36pm
  •  Kurti
  • | Joined May 2007 | Status: Pissed | 302 Posts
I wanted to share a system I am using and which is giving quite good signals.

You have to get adapted to it a bit and learn some patterns but I think if usd the right way, it can be quite profitable.

I am here only sometimes, so don't get mad if I don't answer immediately.
I also am quite lazy so don't be too surprised.

create a chart with stochastic 80,3,3 close/close, exponential, the same with 35,3,3.

The 80 is slower and gives the important signals, 35 can be used to reenter in a certain trend.

u can also use zigzagpointer as extra confirmation, but sometimes gives false signals. i am currently testing it myself.

lets say eur usd is going down, you wait till the 80 stoch goes below the 20 line and then when it crosses back up you have a buy signal. it almost always retraces back to the 20 line and then goes back up (or down from 80 line), if it crosses back don again the trend is resuming.
It happens that the stoch is under the 20 line all the time, then you have very good resistance and support lines, that can be used to trade away from.
If for example stich 80 is under the 20 line goes up to cross it, but gets rejected, the swing high is the 20 level and resistance and can be used as a stop.
it works well on 4 hour and 1 hour and for very longterm on weekly and monthly, but it is discretionary and it is important to know the overall trend and don't get too greedy.

when the stoch crosses the 80 or 20 line enter on the break of the next candle to whichever direction the break occured, stop would be last candle high/low or swing high/low.

when a trend is well established the stoch sometimes breaks the line, price may move a few pips in the right direction, but then reverses. stop and reverse in former direction, as there is a high probability that the trend will continue.
also look out for 50 line in stoch, it is often a resistance line and reverses there.
this system can give good insight into resistance and support lines, but like i said it needs a little time to use it right.

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