Spudfyre's Stochastic 5 Minute Trade

If you have read my previous postings regarding MTF Stochastics, you are probably aware of the 80/20 lines on a stochastic chart. These lines are much more than simple low and high indicators. What is really interesting about Stochastics, is when they reach the extremes, the 10% to 0% and 90%-100% areas.
My current work is modifying the Stochastics indicator and formula to develop an integrated time chart formula based on the basic Stochastic factors. In that development were some simple gems found to hopefully add to your pips.

I originally used the stochastic formula in a program to make my trades, but using the Stochastic 14,1,1 Simple settings on the STochastic indicator will also work.

As always I trade this using the close of the candle. I do this to simplify the trade process. As you have probably experienced many systems have very "fuzzy" entry and exit points which makes the trade very difficult to execute consistently. My hope in this and upcoming entries will be to provide on/off switches for the trades. This can lead to less gains, but certainly will lead to less losses.

Chart: 5 mins
EUR/USD
2 pip broker spread

BUY LONG when the 5 minute Candle %K stochastic <10% at close
BUY SHORT when the 5 minute Candle %K stochastic >90% at close.
Ideally, we want to buy at the closing price of the candle. So it is best not to trade this during highly volatile periods...like news releases unless you are prepared for those risks.

Exits are at the close of a candle only or if a predetermined pip level is reached. However, we never stop loss during a candle...only at the close. This means you have to give your stops some room.
An exit is reached if a new BUY is signalled. There are other options I will address later for this.
If a %K<10% BUY reaches %K>%90% we exit and vice versa.
I suggest an 8-10 pip gain to exit. Set a stop at 50....this is an emergency stop, not a trade stop. I'd set the stop both ways in case the market goes volatile for any reason.

I'll show some trades as it is easier to follow by example.

Glad to see you are still around. I have two questions....

what would be the stoch setting for: stochastic formula %K=100[(C-L14)/(H14-L14)] ?

and...

over what period of time would those 300+ trades have been made?

Thanks!

FW

Great results, Spud. Interested in hearing more about it and seeing your live trades. Thanks for posting.

Thanks for returning and sharing. Still using your "Thread Theory." Looking forward to your posts.

What happened to the first post?

What happened to all of them?

Welcome back Spud, your experiance and guidence were surely missed by a great many.

Welcome back Spud ! I'm very happy to read again your very interesting thread about stochastic, hope you'll not disappear again from FF

Welcome back Spud. Hope your time away has been good to you and your family, and oh, also your trading!! http://www.forexfactory.com/images/icons/icon14.gif

Looking forward to your new sharings.http://www.forexfactory.com/images/icons/icon10.gif

Regards,
K.

I apologize. The wrong documents were posted. I have corrected that error.

Spud,

Were the stats you posted earlier for this same system?

I'm using MetaTrader 4 on FXDD. My numbers may vary from yours. For simplicity I'm going to use the Stochastic indicator at 14,1,1 Simple as our guide, but in real life I'n downloading the OCHL into a program. I do not believe there is any effect on the numbers, but you will need to be quick in your trade entry.

Example 1: Simple 10 PIP Exit
Oct 16 13:15 %K=1.49 Close=1.3423
Buy Long 1.3423 2 pip spread puts me at 1.3425
Exit at 1.3437 pip spread at 1.3435 = 10 pips net
High went to 3445 and low 3423 close 3445

Example 2: 95%K Exit
Oct 17 13:35 %K=9.62 Close=1.3396
Buy Long 1.3396 2 pip spread puts me at 1.3398
Exit at 14:30 when %K=95.83 at close at 1.3409 (1.3407) 9 pip gain
Low was 3388 and high was 3410

Example 3: A Loss If you Don't Catch the Gains and Exit
Oct 17 21:35 %K=7.69 Close 1.3431
Buy Long 1.3431 (1.3433)
Low dropped to 3412 if your stops are too shallow you'll lose money
Exited when price reached 3445 (3443) for 10 pips
High went to 3446
A new BUY signal came in at 22:15 our forced exit at a loss 1.3414 if we stayed in too long
In a trade like this the %K never closed above 33%, it was a fight and as time went on breaking even on this trade would be considered a win.
This is where it gets a little tricky...we can easily add rules like if %K drops 3 consecutive times get out, or if trade time goess too long, etc. However, keep it simple grab some pips and leave and you'll come out ahead. If you have to figt and hope for pips over an extended period like 25 mins..take the breakeven and run if %K is sticking low.

Welcome back.

Lenoxer

This is a summary of my last day traded with this system. I used a little more complicated system on exits and I'll try to explain it here as well. I traded only LONGS this day based on market sentiment.

53 PIP Day Overall.

October 17th, 2008
1:25 am
Trade #1: 10 Pips
%K=3.70 at close 1.3471
25 mins = exited 10 pips from high


Trade #2-4: 6 pips
3:40 am,3:45 am and 3:50 am
%K=2.94,8.82,0.00
First trade stayed in since only 2 pips less than next buy
Second trade looked bad drop so exited first trade at -2 when I had the chance. And exited 2nd trade on same bounce at -2 pips.
Third trade reached 10 pips in 8 mins so exited and took my 6 pip gain overall.

Trade #5-7: Lost 13 pips
4:15 a.m.,4:20 a.m.,4:25 a.m.
Lost 8, Lost 15 and gained 10 for a net of -13 pips.
These were simple close on new Buy signal trades.

Trade #8-9: Gain 20 pips
8:40 a.m. and 8:45 a.m.
These trades bought in at same priced so I didn't close the first trade.

Trade #10: Gain 10 pips
10:00 a.m.

Trade #11: Gain 10 pips
10:55 a.m.
Set my stops and left this one. Took about 45 mins though.

Last Trade #12: Gain 10 pips
12:20 a.m.
Jumped right up to 10 pips in less than 10 mins.

Hi Spudfyre !!!

Very interesting system. Thanks for share.

One question:

When you decide to take only Shorts or Longs ?? Any EMA maybe?

wowwwww what a great surprise... how can you return and don't say hello I'm back ? lol.... I know many people missing you! including me!
I'm glad to see you here again. I still use stochs threads in my trading

Spud!! Glad to see you're back!!! I've been following your MTF system and have done great!!! Man, I am so glad you're back around..so glad to see you. I look forward to trading with you!!

long time (over the year),- hope everything ok, glad you back

Spud,

Seems that i recall you went on hiatus when oil was on its way up. Now oil is back down and you're back. so, your return - a fundamental coincidence or a technical reversal?

in any case - welcome back