One of the best stock trading strategy is to use the Stochastic or Stochastic Oscillator, RSI, and stochastic momentum index in combination. Whenever %K crosses over the %D of stochastic momentum index from above or below, enter the trade. See also at that time stochastic and rsi are also in sync and you do not necessarily follow the overbought or oversold condition. You will make 100% sure shot profit. Choose the time frame you want to trade, intraday, swing trading, monthly, yearly. For intraday trading in equity, choose 5mins time frame and for intraday commodity trading, keep the time frame 15 mins. No other indicator is stronger than this. There is scientific reason behind it. All the variables are smoothed exponentially. Whatever the condition of other indicators and whatever the market condition, you will only make profit. You can backtest it. This strategy works well in all segments, equity, commodity, futures, options, currency.
BREAKING DOWN ‘Stochastic Oscillator’
The stochastic Oscillator is calculated using the following formula:
%K = 100(C – L14)/(H14 – L14)
Where:
C = the most recent closing price
L14 = the low of the 14 previous trading sessions
H14 = the highest price traded during the same 14-day period
%K= the current market rate for the currency pair
%D = 3-period moving average of %K
The general theory serving as the foundation for this indicator is that in a market trending upward, prices will close near the high, and in a market trending downward, prices close near the low. Transaction signals are created when the %K crosses through a three-period moving average, which is called the %D.
History
The stochastic oscillator was developed in the late 1950s by George Lane. As designed by Lane, the stochastic oscillator presents the location of the closing price of a stock in relation to the high and low range of the price of a stock over a period of time, typically a 14-day period. Lane, over the course of numerous interviews, has said that the stochastic oscillator does not follow price or volume or anything similar. He indicates that the oscillator follows the speed or momentum of price. Lane also reveals in interviews that, as a rule, the momentum or speed of the price of a stock changes before the price changes itself. In this way, the stochastic oscillator can be used to foreshadow reversals when the indicator reveals bullish or bearish divergences. This signal is the first, and arguably the most important, trading signal Lane identified.
See how the natural gas moves with this strategy.
See how the jswsteel moves with this strategy. In this strategy stochastic momentum index is the key indicator. Don’t trade with the crossover of stochastic only.
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