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