Divergence on Stochastic (Divergence in Stochastik)
System: + trend reversal
Difficulty: easy more than average
Timeframe from D1 to M30
Shopping couples: Multicurrency
The strategy is to find the entry point into the position based on the trading signals bullish and bearish Divergence (both direct and reverse) on Stochastic.
To get started on this strategy, you must:
1. Have on the trading terminal candlestick price plot selected pair;
2. build on the candlestick chart:
– Bollinger band with the default settings: 20.2 (hereinafter in the examples highlighted in yellow);
– moving average MA8 (shown in red);
– trendlines (red);
– equidistant channels (red);
– Support and resistance levels (also in red).
Trend lines, levels and channels (three last paragraph) are constructed as their location on the chart.
– Fractals are desirable, but not necessary.
3. Building Stochastic oscillator with standard parameters: 5,3,3. It distinguish overbought (0 – 20) and pereprodannosti (80 – 100) – designated by the white dotted line.
Further, the graphs Rates stochastic tracking formation Divergence in timeframes of M30 to D1. The larger the timeframe, the more likely the operation of a trading signal.
Entry points occur when the stochastic line crossed its moving average (solid crossed dotted) at an acute angle in the overbought zone and -pereprodannosti two curves come out of these zones and the price chart and the Stochastic has formed a clear divergence. For an entry point, you can also take an earlier point – the formation of the second peaks (troughs) on Stochastic, as the second peak (trough) usually completes its formation with a delay of one or two candles. In this case it is possible to obtain more profits.
To find the signal confirming the input position are constructed in the graph line rates and indicators named above in the 2nd paragraph. Price rebound from the border (or midline) Bollinger band channel trendline or support levels, resistance increases the likelihood of the right turn of the price and the movement in the other direction. Preferably the presence of topping pieces.
Closing price of the moving average MA8 confirms that the reversal has occurred and the movement in the chosen direction will be continued. It can serve as a basis for building up the position.
Close positions should be when the stochastic lines reached a level opposite the zone (or the price has reached the opposite Bollinger band or border equidistant channel).
The size of the positions – a total of not more than 1/10 of the deposit. If the price has gone in the right direction and is set to breakeven, the search for new divergence on other pairs and finding also includes a lot (lots) of not more than 1/10 of the deposit.
Stop-losses are required, and depending on the pair, timeframe and market volatility ranging from 40 to 70 points.
The screenshot 1 shows bovine Divergence on Stochastic D1 EUR / USD. Price rebound from the lower boundary of the Bollinger Bands.
Entry Point – 1.3035,
Closing price – 1.3217. Manually.
Stop-loss – 1.2965 (not shown).
The screenshot 2 on the left side shows bovine Divergence on Stochastic (H 4, NZD / USD).
Entry Point – 0.7492,
Closing price – 0.7567. Manually.
Stop-loss – 0.7422 (not shown).
On the right side of bearish divergence on Stochastic.
Entry Point – 0.7759,
Closing price – 0.7697. Manually.
Stop-loss – 0.7829 (not shown).
Showing rebounds from the boundaries Bollinger.
3 shows the screenshot bear on Stochastic Divergence (D1, XAU / USD).
Entry Point – 1654.49,
Closing price – 1585.55. Manually.
Stop-loss – 1656.00 (not shown).
Rebound from the Bollinger Bands border.
At all not shown screenshots stop losses in order not to encumber the drawing with additional lines. Their values are given in the text.
P.S .: I would like to hear your suggestions on the confirmation divergence indicators and / or alternative entry points.
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