How to use Fibo and Stochastic Oscillator Indicator?
To start seeking signals by the strategy, you need to establish the Fibo and Stochastic Oscillator on the chart. Just draw the indicator manually from the low to the high of the previous trading day. Besides, you must add the 161.8% and 261.8% levels in order to determine the take-profit points.
In technical analysis of securities trading, the stochastic oscillator is a momentum indicator that uses support and resistance levels. The term stochastic refers to the point of a current price in relation to its price range over a period of time. This method attempts to predict price turning points by comparing the closing price of a security to its price range.
A call opportunity is detected when the following conditions are satisfied:
- Prices break above the maximum of the previous trading day;
- The Stochastic Oscillator crosses above 80.
Conversely, a put opportunity is ascertained when the following requirements are met:
- Prices break below the minimum of the previous trading day;
- The Stochastic Oscillator crosses below 20.
There are some important rules when using this strategy as follows:
- Only one order should be entered at a time;
- The pump candle must be fully closed before any trading decisions are made;
- The order’s expiration should be set in four or five hours;
- The maximum risk for each transaction shouldn’t be more than 3% of your total balance.
If you like this strategy, you might also be interested in this Hanging Man Candlestick
Pros and cons of the strategy
- Enables you to follow the step of “sharks”;
- Offers signals with clearly defined settings;
- Very simple and easy-to-use;
- Engenders high-quality trading opportunities;
- Requires no custom indicators.
- Requires a high level of patience;
- Necessitates you to monitor the platform to spot signals.
There is a fact in the trading world: simple strategies usually bring better results compared to complex ones. The Fibo and Stochastic is a strategy having a very simple structure, but its effectivity is amazing. It’s highly suitable for intraday traders that love to trade on the 1-hour chart. If you are finding a good momentum-based strategy, we highly suggest trying the Fibo Stochastic. Given a right approach alongside tight money and psychology managing methods, we believe you can make substantial profits in the long-term with this prominent technique.