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