Combining Stochastics with Different Types of Technical Stock Index Indicators
This tutorial should be called: Combining Stochastics with other Indicators, but Stochastic Stock Indices System sounds real nice.
Stochastic Oscillator technical indicator can be combined with other indicators to form a stock indices system. For our example we will combine it with:
- RSI
- MACD
- Moving Averages Stock Indices Trading Technical Indicator
Example 1: Stock Indices Trading Stochastic System
Sell Stock Indices Signal Generated using Stock Indices Trading Stochastic System
From our stock indices system the sell signal is generated when:
- Both Moving Averages are moving down
- RSI is below 50
- Stochastic moving downward
- MACD heading downward below center-line
The sell signal was generated when all these stock indices rules were met. The exit stock indices signal is generated when a trading signal in opposite direction is generated i.e. When the technical indicators reverse.
Good thing about using such a stock indices system is that we are using different types of stock indices indicators to confirm the trade signals and avoid as many whipsaws as possible in the process.
- Stochastic - is a momentum oscillator stock index trading technical indicator
- RSI- is a momentum oscillator stock index trading technical indicator
- Moving Averages Technical Indicator- is a stock indices trend following stock index trading technical indicator
- MACD- is a stock indices trend following stock index trading technical indicator
It is very useful to combine more than one stock indices indicator, as a combination of stock indices signals is better than relying on just a single stock indices technical indicator. The stock index trading technical indicator combinations reinforce each other, and cancel out false whipsaw stock index trade signals.
A stock indices trend following indicator helps a trader to see the overall picture, while using more than one momentum stock indices technical indicator gives better & more reliable entry & exit points for trading stock indices.
The stock indices indicators combinations & their stock indices signals help to decipher a lot of the stock indices market activity.
Example 2: Stock Indices Trading Stochastic System
Buy Stock Indices Signal Generated using Stock Indices Trading Stochastic System
For this example the stock indices trend is clearly upward, but at some point there were a few stock indices whipsaws generated by the stochastic oscillator stock indices technical indicator, can you identify them? - So the question is how can a trader avoid trading these stock indices whipsaws?
Well, the answer is that by looking at the other technical stock indices indicators such as MACD indicator a trader could have avoided the whipsaw, even the MACD technical indicator had not given a cross-over stock indices signal although it was very close to the zero center-line level, at the same time the gradient at which moving averages technical indicators turned was not so sharp as to warrant a decisive stock indices market stock indices trend reversal. Well the thing is that it’s not so obvious when it comes to recognizing stock indices market whipsaws: it is a skill that takes some time but after some time you can spot whipsaws from a mile away.
One tip is that as long as MACD indicator is above zero center-line even if the MACD lines are heading downwards then the trend is still upwards. As you can see from the above example MACD indicator never went below zero line and afterwards the upward trend continued with the MACD technical indicator maintaining above Zero line & continuing to move upwards.
During ranging stock indices markets Stochastic Oscillator indicator will give the fastest stock indices signals which are prone to whipsaws. This is why stochastic oscillator indicator is best combined with other indicators and the stock indices signals traded are confirmed by another one or two other Indices indicators.
