Contents:Almost all traders in the world have known that trading the trend is the only way for them to profit in such a volatile market like Binary Options. However, the major matter is how to define market trends. A trend seeking strategy named Double Stochastic was invented to solve that problem.
What is Stochastic Oscillator Strategy?
The Double Stochastic Oscillator system is the combination of two separate stochastic oscillators, each of which contains two lines: the main line and the signal line. The first stochastic with the setting (21, 9, 9) called “Slow Stochastic” is used to highlight the strong trends. The other stochastic, also known as “Fast Stochastic”, has more brief time periods (9, 3, 3) and is applied to represent the shorter-term market performance, also to collect trading signals.
The principle of this technique is that Binary Options traders will trade the signals which are in the same direction of the current strong trends and avoid all the risk-trend signals. This is the basic key of all trend following strategies.
How to trade with Stochastic Oscillator Indicators?
This system works best on a 1-hour or 1-day chart. After adding the slow and the fast stochastic oscillating indicators on your platform, first, you will have to identify the major trends by using the slow one.
Call signals: when the main line crosses above the signal line in the slow stochastic, an uptrend is confirmed. Now, we will grab call signals from the other stochastic, also by looking at its line performance. We enter call signals anytime the fast-stochastic main line turns above the fast-stochastic signal line.
Put signals: when the main line crosses below the signal line in the slow stochastic, a bearish trend is spotted. We enter put signals anytime the fast-stochastic main line turns below the fast-stochastic signal line.
There are some entering rules you should note as follows:
- Do not trade the risk-trend signals. It means that if you see a bullish major trend, for example, but the fast stochastic indicates a bearish trading opportunity, you should ignore that signal immediately.
- You have to wait for the candlestick to close before considering an entry valid.
- The expiry times are depended on your trading time frame. If you use the 1-day chart, the expiry will be could be a week later. If you trade on the 1-hour chart, you can set the expiry to be 4-8 hours later.
- If the fast stochastic lines are in overbought or oversold territory, please also skip the signals. It’s not worth for us to enter such risky trading occasions.
Advantages and Disadvantages of the Double Stochastic strategy
- Firstly, it is quite easy-to-use
- Secondly, the fact that it is composed of two leading indicators enables us to define more accuracy entries
- Traders might be confused due to a lot of unclear signals generated by too many fast stochastic lines crossovers in consolidating market conditions
- Traders also have to constantly observe the charts to avoid missing signals
The Double Stochastic Oscillator is an effective trend-following technique for Binary Options traders to seek market trends and stick to them - the only way to profit substantially. However, we can’t expect this system to generate 100% profitable signals since there’s no such totally perfect trading strategy. It is very necessary for us to combine this system with basic technical trading knowledge and use a higher time frame like 1-day to collect high-quality signals.