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  1. #1
    Legendry Member Michael Hodges's Avatar

    Stochastic Oscillator For Binary Options Trading !!!

    I couldn't find a thread in the tools forum about stochastic, and since I am on a quest to bring stochastic to your attention, I am creating this thread to introduce it. First off I will post links to articles on the main website that discuss the indicator and its uses, then later we can discuss them here and also talk about strategy in my room, The Geeks Simple Stochastic Trend Following Binary Options Strategy.

    Using Stochastic For Crossover Signals
    Multiple Time Frame Indicator; Stochastic

    Basic intro: Stochastic is an oscillator tool for technical analysis. It is based on randomness and chaos theory. It provides trend following signals, predicts reversals, confirms support and resistance and is basically a great all-around tool for traders. I use it every day, in every way, you can follow along with me and my trading here in Trading With The Geek

  2. #2
    Legendry Member Michael Hodges's Avatar
    I just made a nice trade using stochastic, on the USD/JPY 30minute chart with one hour expiry. Here's the link to the trade, I included two screen shots displaying the entry signal and expiration. This is an example of how stochastic can be used to confirm resistance and predict reversals.

    http://forums.binaryoptionsthatsuck....3887#post43887

  3. #3
    Legendry Member milos's Avatar
    Nice trades

  4. #4
    Legendry Member Michael Hodges's Avatar
    A second identical set up occurred about 30 minutes after the close of the first trades, I took it and it profited, with a move from 121.500 down to 121.250, pretty nice. But now its bouncing back to test restistance again, maybe it will set up again....?

  5. #5
    Rookie Member Chayuz's Avatar
    Got a question about Multiple Time Frame Indicator; Stochastic
    Trying to backtest it to get better understanding about the indicators. Where did i go wrong with last signal(violet)?
    Im using same stochastic values as mentioned there: 5min chart / upper stochastic 5min 11,3,3 / lower 60min 11,3,3. For expiry i took same value as lower stochastic(1hour, correct???).
    Click image for larger version. 

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    With 60min expiry violet PUT will end up out of money. My guess is that 5min stochastic is fine but im kinda lost with 60min stochastic...cap between 2 lines is too small or blueish line isnt dropping fast enough?

    EDIT: How do i make picture larger?

  6. #6
    Legendry Member Michael Hodges's Avatar
    it looks to me like the asset was drifting sideways, on top of support and in between resistance, which makes trend following entries harder to predict. in this case I would have tried calls at the bottom of the range and puts in the middle. Based on this chart it looks at first glance like the asset was in the middle of the range... I don't think it was a clear signal.

    The bluish line is resting above the lower signal line, this is typically a confirmation of support. with this in mind the next dip in your upper stochastic would have been a great bullish entry.

    when using stochastic like this try to make trades in line with the trend... but only if it is a trade up from support, or down from resistance... trying to trade down above support, or up below resistance, are not high probability trades.

    also, try using two different charts. Use a chart of one hour bars with an identical stochastic, I only use standard settings, on the one hour chart identify if the asset is moving up, moving lower or rangebound.... then go down to the 5 minute charts to find an entry signal. The best trades will be when the one hour chart fires a signals, then you go to the 5 minutes charts and enter on the next 5 minute signal in line with the one hour signal.

    hope this helps, let me know.

  7. #7
    Rookie Member Chayuz's Avatar
    Thx, after reading ~5 times i think i understood. What about first 3 signals, are they better or just luck?

  8. #8
    Master Member Bogdan G's Avatar
    All 4 signals are correct according to my strategy. However, the fourth comes when the hourly Stoch is close to oversold (take this with a pinch of salt because often the Stoch will be oversold/bought and the pair will continue in that direction) and the market has clearly run its course for the day so the evening "lethargy" begins. Also, you have a Triple Bottom there, which is a very bullish pattern. Also, pay attention to what Michael said.
    Cheers!
    Insanity: doing the same thing over and over again and expecting different results. Albert Einstein (attributed)

  9. #9
    Master Member Bogdan G's Avatar
    If you plan on backtesting, please pay attention to this:

    "The only problem I know of is this: if you are using an Hourly Stoch, its lines will still move until the hourly candle is finished. That is not repainting; it’s just the way MTF indicators work, but it’s something you must be aware of. Anyway, once the candle corresponding to your higher stoch is over, the indicator will be locked i.e. its lines will not move anymore (an hourly Stoch will be locked in when the hourly candle closes; a 4H Stoch will be locked in once the 4H candle closes, etc.)."

    Use Lightshot to post better and bigger pictures http://prntscr.com/9275b4

    All best!
    Insanity: doing the same thing over and over again and expecting different results. Albert Einstein (attributed)

  10. #10
    Legendry Member Michael Hodges's Avatar
    Quote Originally Posted by Bogdan G View Post
    If you plan on backtesting, please pay attention to this:

    "The only problem I know of is this: if you are using an Hourly Stoch, its lines will still move until the hourly candle is finished. That is not repainting; it’s just the way MTF indicators work, but it’s something you must be aware of. Anyway, once the candle corresponding to your higher stoch is over, the indicator will be locked i.e. its lines will not move anymore (an hourly Stoch will be locked in when the hourly candle closes; a 4H Stoch will be locked in once the 4H candle closes, etc.)."



    Use Lightshot to post better and bigger pictures http://prntscr.com/9275b4

    All best!
    this is true for any indicator based on the start and close of a current candle, if the candle is not completed the indicators can and will repaint as the candle changes.... most of the time you will have to reload the chart to see it, ... I suggest backtesting only when the market is closed, no new candles, also is a good idea for newbies too.... analyze and make predictions in a closed market, after hours, when candles and indicators aren't changing.

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