The most simple way to filter Stochastic oscillator is to add one more indicator with different settings. Double Stochastic Binary Options Trading System is based on two Stochastics with fast (8.5.3) and slow (14.7.3) settings. As long as Stochastic has two lines in its window, the signal occurs when both lines cross each other preferably in the overbought (put) or oversold (call) zones. However, traders should monitor the fast one first as the frequency of signals is higher for a shorter period. Once the fast Stochastic performs the crossover, traders should wait for the slow one to whether to confirm the start of the cycle or postpone it.
This trading strategy is also suitable for ultra-short timeframes such as 15- and 30 minutes. In our example, we consider choosing GBP/CHF as the underlying asset. The reason is that cross-rates are vulnerable to often reversal but not one-way action as majors. That feature allows traders getting the advantage of unilateral price action, using both call and put cycles during one trading session several times. The Double Stochastic System increases the reliability of trading signals as well as improves signals’ efficiency.
On the chart below (1H timeframe), it’s obvious that the faster Stochastic triggers the signal before the slower one confirms it. Therefore, the trading cycle should start only when the second oscillator performs the crossover. Sometimes, trading signals happen in the middle between oversold and overbought levels, however, such conditions have to have additional filtering. Overbought (80) and oversold (20) levels should remain the default, but the period settings have to be modified.