Trade Forex Trading

Learn Forex Stochastic Oscillator Trading Strategy

This course will talk about how to come up with a strategy that is based on the stochastic technical indicator. This stochastic oscillator strategy will be used by the traders to trade trending markets. This strategy is simple to trade with and simple to follow. Using the stochastics traders can use this technical indicator to develop a trading strategy that will be used to identify trends.

Forex Trend

The different techniques used to figure out & identify trends.

·An upward trend happens when the market is generally moving higher, and the price keeps reaching new high points and staying above previous low points.

·A downward trend is when the market is moving in a downward general direction and the price keeps making lower lows and lower highs.

This is the first thing to look out for when determining the market trend, one can then use another different technique to confirm the trend. For example a trader may use a trendline and if the trend line direction is up the market trend is then upward but if the trend-line direction is downwards then the trend is downward.

The 200-day moving average MA is another tool a trader can use to determine the market trend. The trend is seen to be bullishly upward if the price is higher than the 200-day moving average. The trend is deemed to be a negative bearish market trend if the price falls below the 200-day moving average.

Stochastic Trading Strategy

After determining the trend the trader will then use the stochastic indicator to ascertain where to open a buy or a sell trade. For this strategy a fx trader will use the overbought & over-sold levels to detect when to open trades. Oversold level is the 20 mark on the stochastic & the over-bought level is the 80 mark on the stochastic oscillator indicator.

Upwards FX Trend - in an upward trend the FX trader waits for the stochastic tool to fall back and move downwards towards the oversold points. This means the market is briefly pulling back and a forex trader will wait to buy after the pullback. After the stochastic line hits the oversold point, it will not remain there because the market goes up, so this is a short retracement.

A trader will execute a buy trade once the stochastic oscillator leaves the oversold level and starts heading and moving upwards.

Down-wards Trading Trend - in a downwards trend the trader will wait for stochastic trading indicator to retrace upwards & move upwards up to the over-bought levels. This will mean that there is a short-term market retracement and a forex trader will wait for the best opportunity to sell after this upward retracement. Once the stochastic oscillator gets to the over-bought level it will not stay there for long because the trend is downwards & this will only be a temporary price pullback.

A trader will start a sell when the stochastic oscillator gets away from being overbought and then goes in a downward direction.

You can use this method to find the best time to start a trade after the price drops back a bit. This will give the currency trader a better chance of making money because the trades will be started at the best time, which is after the price drops back a bit. This will make the trades less risky and more rewarding because the chances of the trades going back down further after these times are lower. This is because the price is already too low in a market that's going up, or too high in a market that's going down.

A trader should then set their stoploss orders a couple of pips below where they opened a buy position or a few pips above where they opened a sell position. The trader will then determine where to take profit orders based on a favorable risk reward ratio, or they can set the take profit at a specified number of pips based on the trading rules of their forex plan.

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