Stochastic Commodity Trading System
This tutorial should be called: Combining Stochastics with other Technical Indicators, but Stochastic Commodity System sounds real nice.
Stochastic Oscillator technical indicator can be combined with other indicators to form a trading system. For our examples we will combine it with:
- RSI
- MACD
- Moving Averages Commodities Trading Technical Indicator
Example 1: Commodity Trading Stochastic System
Sell Commodity Trading Signal Generated using Commodity Trading Stochastic System
From our commodity trading system the sell commodity trade signal gets generated when:
- Both Moving Averages are moving down
- RSI is below 50
- Stochastic moving downward
- MACD heading downwards below center-line
Sell signal was generated when all these commodity trading rules were met. The exit commodity signal is generated when a signal in opposite direction is generated i.e. When the commodities trading technical indicators reverse.
Good thing about using such a commodities system is that we are using different types of commodity indicators to confirm the trade signals & avoid as many whipsaws as possible in the process.
- Stochastic - is a momentum oscillator commodity trading technical indicator
- RSI- is a momentum oscillator commodity trading technical indicator
- Moving Averages Technical Indicator- is a commodity trend following commodity trading technical indicator
- MACD- is a commodity trend following commodity trading technical indicator
It is very useful to combine more than one commodity indicator, as a combination of commodity trading signals is better than relying on just a single commodities trading technical indicator. The commodity indicator combinations reinforce each other, and cancel out false whipsaw commodity trade signals.
A commodity trend following technical indicator helps a trader to see the overall picture, while using more than one momentum commodity technical indicator gives better & more reliable entry and exit points for trading commodity.
The commodity indicators combinations & their commodity trading signals help to decipher a lot of the commodities trading market activity.
Example 2: Commodity Trading Stochastic System
Buy Commodity Trading Signal Generated using Stochastic Trading System
For this example the commodity trend is clearly upward, but at some point there were a few commodity trading whipsaws generated by the stochastic oscillator commodity indicator, can i spot them? So the question is how can a trader avoid trading these commodity trading whipsaws?
Well, the answer is that by looking at the other technical commodity indicators such as MACD indicator a trader could have avoided the whipsaw, even the MACD technical indicator had not given a crossover commodity trading signal although it was very close to the zero center line level, at the same time the gradient at which the moving averages technical indicators turned was not so sharp as to warrant a decisive commodity market trend reversal. Well the thing is that it’s not so obvious when it comes to recognizing commodity market whipsaws: it's a skill that takes some time but after some time you can spot whipsaws from a mile away.
One tip is that as long as MACD indicator is above zero center-line even if the MACD lines are heading downwards then the trend is still upwards. As you can see from the above example MACD indicator never went below zero line and afterwards the upward trend continued with the MACD commodity trading technical indicator maintaining above Zero line & continuing to move upward.
During ranging commodity markets Stochastic Oscillator indicator will give the fastest commodity trading signals which are prone to whipsaws. This is why stochastic oscillator indicator is best combined with other indicators & the commodity trading signals traded are confirmed by another one or two other Commodity Trading indicators.
