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