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Stochastics Oscillator

This trading strategy is based on the oversold or overbought of a given financial instrument. In our example, we will use the GBP / JPY cross, because the British pound against the Japanese yen is known for its volatility and larger movements. 

To measure the mentioned parameters, we will use a technical oscillator Stochastics, which we will set to parameters 28,3,3, ie to a slower base, in order to filter out as many false signals as possible.

We choose a time frame of 240 minutes, ie four hours, so that we can capture larger movements on this currency pair.

We will enter long positions (ie buy) when both Stochastics curves fall from values below 20 back above 20. This may signal that the market is oversold and is ripe for an upward correction, as investors are likely to close short positions and the market will therefore receive purchases that could suppress the price upwards.

As we can see in the chart, we would record three buying positions, all of which would end up in profit as the market picked upwards.

Otherwise, we will sell (ie short-circuit) when both Stochastics curves get back from below 80 below 80. This may signal that the market is overbought and is ripe for a downward correction, as investors are likely to start closing long positions and the market will therefore receive sales that could push the price down.

As we can see in the chart, we would realize three sales positions and even here they would all end up in profit, because the market went down.

Since it is a more volatile instrument, it is necessary to choose a larger stop loss, e.g. 100 pips, while the withdrawal of profit should be made at 150-200 pips, or if the position is in profit, slowly move the Stop loss and do not use the Take profit order. In the case of greater movement, the potential for profit is much greater. 

However, it is important to kept mind that even this strategy is not infallible and in some cases may not work.

This strategy is also suitable for beginners.


Start with this strategy

Trading is risky and your entire investment may be at risk.

Warning: The presented strategy is not investment advice and should not be taken as a crucial factor for successful trading, as it could be too complicated for a client starting with trading and would not have to offer the desired results. This strategy is part of the marketing material and is provided free of charge to support informed decisions and understanding of trading markets.

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Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73.72% of retail investor' accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Read our Risk Disclosures.