Trading strategies require two basic things. The first one is versatility, so the strategy is suitable for different timeframes. Secondly, it should be simple so traders can understand it and make informed decisions. The “Double Stochasics” combines all the above-described nuances and at the same time has a yield rate of up to 80%, which is very good for any financial exchange. In addition, when trading with the IQ Option Broker, you receive all tools to apply it in your trading platform.
The Stochastic oscillator was developed by George Lane in the 1950s. It tracks the evolution of buying and selling pressure, identifying cycle turns that alternate power between bulls and bears. Few traders take advantage of this predictive tool because they don’t understand how best to combine specific strategies and holding periods. It’s an easy fix, as you will see in this quick primer on Stochastics settings and interpretation.
Stochastic Oscillator Basics and Settings
Choose the most effective variables for your trading style by deciding how much noise you’re willing to accept with the data. Understand that whatever you choose, the more experience you have with the indicator will improve your recognition of reliable signals. Short-term market players tend to choose low settings for all variables because it gives them earlier signals in the highly competitive market environment. Long-term market timers tend to choose high settings for all variables because the highly smoothed output only reacts to major changes in price action.
The Stochastic Oscillator is located below the price chart. The tool consists of two signal movings % K and % D as well as levels: 0, 20, 80 and 100. The latter form the overbought and oversold zones of the market, the crossing of which is the main signal to open a deal. However, the double stochastic strategy offers different approach.
As the title of the strategy suggests, you need to install two Stochastic oscillators on the chart. To do this, in the IQ Option terminal, go to the “Indicators” menu, use the “Popular” submenu and select the Stochastic Oscillator. Then repeat the steps to activate the second Stochastic.
It is time to set and configure both Stochastics. To go to the settings menu for each of the Stochastics, you need to click on the icon next to the indicator name.
We recommend using the following parameters for the first Stochastic % K – 9, MA – 3 %, D – 3.
We recommend using the following parameters for the second Stochastic: 21, 9 and 9, respectively.
You should trade with assets with high or medium volatility for trading.
Set up your chart to Japanese candlesticks or bars.
Timeframe – from 5 minutes to an hour.
How to trade with the “Two Stochastics” strategy?
Now that the platform is ready for trading according to the new system, it is time to deal with its signals.
- The CALL contract should be bought when the signal lines on both oscillators are in the oversold zone (between 0 and 20). At the same time, in both cases, the fast D should cross the slow K from bottom to top.
- The PUT contract, on the contrary, is purchased when the signal lines on both oscillators are in the overbought zone (between the levels of 80 and 1000). At the same time, in both cases, the fast moving D must cross the slow moving K from top to bottom.
The expiration period is set equivalent to the time of formation of three bars.
The Double Stochastics strategy proved to be reliable and profitable. Stochastics don’t have to reach extreme levels to evoke reliable signals, especially when the price pattern shows natural barriers. While the most profound turns are expected at overbought or oversold levels, crosses within the center of the panel can be trusted as long as notable support or resistance levels lines up. This highlights the importance of reading the price pattern at the same time you interpret the indicator.
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
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