The first idea that gets into the mind of numerous financial market
traders, when the stochastic is oversold, is a bullish signal. However,
there are circumstances when on can sell, even though, the stochastic
indicator is oversold.
Image = a stochastic trading
chart that displays the stochastic
indicator beneath a stock chart
Image = daily chart NZD/CAD
showing a blue horizontal line
warning line, which was drawn
as soon as the stochastic indicator
went beneath the twenty-five level
For a technical trader, the oversold stochastic indicates that the price is
at a support level. Really, if it is a reliable support, the price will turn.
However, if the support breaks, the asset may continue to decline
though the stochastic is oversold.
To avoid common oversold stochastic trading mistakes, one ought to
apply a multiple time frames trading strategy.
Stochastic is oversold on the four-hour chart
a/ One will draw the warning line, and current channels to avoid
trespassing market pattern structures.
b/ One may switch to the fifteen-minute chart,
and draw the channels. Once the asset rises
above the declining channel and retests
the channel, which will constitute a bullish signal.
c/ The closing step is to revert to the three-minute chart. Once again one
will draw the channels. The entry is at the retest point after the price
rises above the negative slope channel.
Trading Bearish Oversold Stochastic
Though the oversold ultimately signifies a support, there are occasions
when that support will become unreliable. In this instance, one will look
for a chance to sell adopting a top-down trading strategy.
Stochastic is overbought on the four-hour chart
1/ The bearish trade setup is the retest on the edge of that support, after
the price dips below it on the four-hour chart.
2/ The bearish signal is the retest of the rising channel on the fifteen-minute
chart after the asset rises above it.
3/ The low-risk entry point will occur on the three-minute chart at the retest
of a declining channel, only after the price escapes the bearish channel.
Contrary to the prevailing assumption, the overbought stochastic does
not all the time designate an overbought asset. The stochastic may be
overbought since it touches the seventy-five level, yet the asset
may not be. Really, one can avoid common trading mistakes if one
learns to trade the overbought stochastic like a pro.
How to trade the overbought stochastic like a pro
At any time the stochastic becomes overbought, day or swing traders
must draw a warning line. Anytime, that stochastic is overbought, it
indicates that the price is at a resistance level. One will acknowledge
that resistance by highlighting it on the chart.
One will also use a multiple time frames trading strategy.
Multiple time frames stochastic day trading
One may connect the four-hour chart, fifteen-minute and three-minute
charts. Similarly, another can also employ the two-hour, thirty-minute
and ten-minute charts. Furthermore, others may also join the hourly,
fifteen-minute and five-minute charts or even the daily,
two-hour and five-minute charts.
Stochastic Top Down Swing Trading
One may apply
1/ the weekly chart (for the trading setup)
2/ daily (for the signal)
3/ and thirty-minute chart (for the low-risk entry time frame)
One can also link the
a/ two-day chart (trade setup time frame)
b/ four-hour chart (signal time frame)
c/ fifteen-minute chart (entry time frame)
In order to swing trade like a pro, one ought to apply the trading triangle,
and a multiple time frames trading method in a suitable market context.
In those examples, the first higher time frame highlights the trading setup, second
is for the trading signal and last time frame is for the entry.
View the video tutorial
Title: How To Swing Trade Using Stochastics Like The Pros
Description: Know how to make profitable swing trading
decisions using the slow stochastic indicator like the
professional traders. Follow a rigorous trading method
that will change your trading for better. Watch and
rate this educational video today.
Trading stochastic is an educational webpage that shows day and swing
traders how to trade the overbought and oversold stochastic indicator
using a multiple time frames trading strategy like a pro.