› Best Combination of Technical Indicators: Stochastic Oscillator and EMA

Best Combination of Technical Indicators: Stochastic Oscillator and EMA

The Trend Is Your Friend is the most important rule in investing. That means, trend-following strategies usually bring higher and longer-term returns than scalping or counter trend trading systems. To continue the trending series, today, we would like to introduce to you a useful binary options strategy composed of two famous indicators - Stochastic Oscillator and Exponential Moving Average.

What is a Stochastic and EMA Indicators?


Like every professional trend-sticking strategy, this system meets the basic requirement: having at least one leading indicator and one lagging beacon. The Stochastic Oscillator (the leading indication) with the setting of 5,3,3 here is responsible for filtering out false signals spotted by two Exponential Moving Average lines, of which the function is to identify tradable trends and trading opportunities. One of the EMA has the period setting of two days, running along with market performance to detect signals, while the other, with the period setting of four days, highlights the trends.

An exponential moving average (EMA) is a type of moving average (MA) that places a greater weight and significance on the most recent data points.

Thus, the establishment of this strategy is as follows:
  • EMA with 2-day period;
  • EMA with 4-day period;
  • Stochastic Oscillator with the setting of 5,3,3

This strategy has been carefully tested by us for the last 12 months with over 200 signals. So far, it has already confirmed a win-rate of 83.27%.

How to use Combination of Stochastic and EMA?


The technique works best on the one-day chart and could be applied to all currency pairs. The indicators mentioned above are available in Finmax’s advanced charts, so that you just need to setup as the guide.

A bullish opportunity is considered valid when it satisfies the conditions below:
  • The EMA (2) turns above the EMA (4);
  • Stochastic Oscillator’s lines are below the 50 level.

If you like this strategy, you might also be interested in this Covered Call Binary Option Strategy
Best Combination of Technical Indicators: Stochastic Oscillator and EMA

Conversely, a bearish occasion is present when it meets the following requirements:
  • The EMA (2) crosses below the EMA (4);
  • Stochastic Oscillator’s lines are above the 50 level.


Best Combination of Technical Indicators: Stochastic Oscillator and EMA

There are some important entering rules when trading with the system as follows:
  • Only one position should be entered at a time;
  • The pump candlestick must be fully closed before affirming a valid signal;
  • The expiry time should be set 4 times larger than the period of the trading chart. For example, you can set the finishing time to be 4 days when trading on the one-day chart.

Pros and cons


Pros:
  • easy-to-use and easy to set;
  • helping eliminate unreliable trading occasions very effectively;
  • enables traders to collect dozens of trading opportunities.

Cons:
  • necessitates to constantly observe the trading platform to seek for signals;
  • technique requires a high level of patience.

Conclusion


Our suggested strategies are always tested carefully. Therefore, with a win-rate of 83.27% along with plenty of advantages mentioned above, this technique has shown itself to be a very beneficial binary options system and deserves to be put in the top spot on our recommendation list. We hope you will enjoy it. Anyhow, don’t forget that there is no 100% winning system, and the best way to protect your balance is to always apply risk controlling and psychological managing methods while trading.


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