Stochastic Energies Trading System
This tutorial should be called: Combining Stochastics with other Indicators, but Stochastic Energies Trading System sounds real nice.
Stochastic Oscillator technical indicator can be combined with other indicators to form a energies system. For our example we will combine it with:
- RSI
- MACD
- Moving Averages Energy Trading Technical Indicator
Example 1: Energies Trading Stochastic System
Sell Energies Trading Signal Generated using Energies Trading Stochastic Trading System
From our energies system the sell signal is generated when:
- Both Moving Averages are moving down
- RSI is below 50
- Stochastic heading downwards
- MACD moving downwards below center-line
Sell signal was generated when all these energies rules were met. The exit energies signal is generated when a signal in opposite direction is generated i.e. When the technical indicators reverse.
The good thing about using such a energies system is that we are using different types of energies indicators to confirm the trade signals and avoid as many whipsaws as possible in the process.
- Stochastic - is a momentum oscillator energies indicator
- RSI- is a momentum oscillator energies indicator
- Moving Averages Technical Indicator- is a energies trend following energies indicator
- MACD- is a energies trend following energies indicator
It is very useful to combine more than one energies indicator, as a combination of energies signals is better than relying on just a single energies technical indicator. The energies indicator combinations reinforce each other, and cancel out false whipsaw signals.
A energies trend following indicator helps a trader to see the overall picture, while using more than one momentum energies technical indicator gives better and more reliable entry & exit points for trading energies.
The energies indicators combinations and their energies signals help to decipher a lot of the energies market activity.
Example 2: Energies Trading Stochastic Trading System
Buy Energies Trading Signal Generated using Energies Trading Stochastic System
For this example the energies trend is clearly upwards, but at some point there were a few energies whipsaws generated by the stochastic oscillator energies indicator, can i spot them? So the question is how can a trader avoid trading these energies whipsaws?
Well, the answer is that by looking at the other technical energies indicators such as MACD indicator a trader could have avoided the whipsaw, even the MACD technical indicator had not given a crossover energies 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 energies market energies trend reversal. Well the thing is that it's not so obvious when it comes to recognizing energies 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 indicator maintaining above Zero line and continuing to move upwards.
During ranging energies markets Stochastic Oscillator indicator will give the fastest energies signals which are prone to whipsaws. This is why stochastic oscillator indicator is best combined with other indicators and the energies signals traded are confirmed by another one or two other Energies indicators.
