HOW TO USE STOCHASTIC OSCILLATOR !!!

This time we will discuss how to choose accurate stochastic settings, and we will also discuss how to combine the Stochastic Oscillator indicator and the Moving Average indicator. You can use this strategy for various pair of assets such as Currency, Gold and Oil.

What is the Stochastic Oscillator Indicator?

Stochastic Oscillator is an indicator that specifically can measure the saturation area of a movement of buying and selling transactions on an asset whether it's Currency, Commodities, or Shares.

Stochastic is basically one of the indicators included in the Oscillator type indicator. There are many other indicators that are also included in the Oscillator type, such as: Relative Strength Index or RSI, Parabolic SAR Indicator, and MACD (Moving Average Convergence Divergence). Oscillator type indicators are used to identify indications of a signal from the start of the formation of a trend as a basis for making open position decisions.

The Stochastic Oscillator indicator was created around 1950 by George C. Lane. Until now, this indicator has become one of the default indicators that is certainly in the Meta Trader application.

Here we have conducted a case study by trading using the Stochastic indicator combined with the MA indicator (Moving Average) for 12 days with quite satisfactory results.

For example, Tita can see in the picture of EUR / USD price movements above using the H1 timeframe (1 hour). There are 2 parts in the image above, please refer to the explanation:

- For the top chart, there is information on EUR / USD pair price movements and there are 3 moving average indicator lines in red. By using these indicators you can easily see the direction of the current trend.

- For the bottom graph is the information of setting the Stochastic indicator using parameter 5,3,3. By selecting this indicator setting we can identify the signal to open a position quite accurately. Armed with this information we can find out to open Buy or Sell transactions when there are crosses on both the red and blue lines that are on the indicator.

How To Accurate Stochastic Settings

After understanding how to read the information, we will discuss how to determine settings that are accurate enough for both indicators in Meta Trader:

1. Stochastic indicator

2. Moving Average (10, 25, 50)

The above settings are developed from standard parameters that already exist in general, but a slight modification was made by changing the MA Method parameter to Exponential.

With a combination of these indicators, you can identify the right moment and timing to determine the open position of either buy or sell. Some important points that you should always pay attention to when using this method are:

1. The three MA lines (Moving Average) have a function to identify the direction of the current trend.

2. If you notice in the Stochastic indicator there are 2 lines of saturation area, namely line 80 and line 20. If you want to open a Sell position, pay close attention to the Stochastic indicator, you are advised to open a position when an intersection occurs in the 80 line area. Then when you want to open a Buy position, wait for the intersection to occur in the line 20 area.

3. Moment or signal from the Entry Point is quite accurate if the H1 and H5 time frames occur in the same line crossing. In general, this moment in one day can occur 3-5 times.

For anticipatory steps to reduce risk, please set a Stop Loss point of at least 20 Points, if you choose to use the M15 - H1 time frame.