Create your own trading system: entry point # 8
We continue to explore different points of entry into the market.
Today I want to show you a complex entry point that arises from the analysis of stochastic cycles.
As you know, the Stochastic indicator shows overbought and oversold zones. But, personally to me, he helps to find important levels of support and resistance.
The essence of the theory of stochastic cycles
The movement of the Stochastic indicator between zones 80 and 20 displays the beginning and end of the wave (impulse, or mini-trend). But, my observation showed that it is necessary to take into account not all the intersections of zones 20 and 80 with the Stochastic indicator.
The secret of the practice of using stochastic cycles
And the secret is simple: you need to take into account only those highs or lows of the price at which the stochastic indicator began its journey from zone 80 to zone 20 (down), or from zone 20 to 80 (up).
That is, we do not know when the growing price movement will end until the stochastic, starting from 20, comes to 80, and decreases back to 20 (the bullish stochastic triangle). Also with a falling motion, it will end when the stochastic crossed the zone 80, dropped to 20, and returned back to 80 (bearish stochastic triangle).
Support and resistance levels
As you can see on the EURUSD chart there are a lot of highs and lows in prices. There are many different methods of applying support and resistance levels.
Personally, I like my method - drawing support and resistance levels according to the highs and lows of the stochastic cycle.
The reversal line is the level of the stochastic maximum or minimum, which, as a rule, occurs at the base of the previous pulse. The logic is simple: if the price was able to absorb the previous movement, then a turn in the opposite direction is likely.
How to trade
There are several regularities for entering a trade in stochastic cycles.
1. Bullish and bearish triangle
We waited for the stochastics from 20 to rise to 80, and to fall to 20, entry into the purchase.
We waited until the stochastic dropped from 80 to 20, and rose to 80, the entrance to sales.
2. Retest level
We buy if the price has returned to the previous top of the stochastic cycle.
We sell if the price has returned to the previous low of the stochastic cycle.
3. Entrance to the rebound from the pivot line
We buy when the price bounces from the reversal line.
We sell when the price bounces from the reversal line.
Indicators:
Stochastic, 15.3.3.
Timeframe: H1
Currency: EURUSD
Personally, I only trade the retest level - this is a more likely signal.
Rules for entry into position:
We buy if:
The Stochastic has formed a bullish triangle;
We are waiting for the price to fall to the previous top of the stochastic cycle, we enter the buy.
We Sell if:
Stochastic shaped bearish triangle;
We are waiting for the price to rise to the previous low of the stochastic cycle, we enter the sell.
Exit position:
You can use a fixed profit, or trailing stop.
Today I want to show you a complex entry point that arises from the analysis of stochastic cycles.
As you know, the Stochastic indicator shows overbought and oversold zones. But, personally to me, he helps to find important levels of support and resistance.
The essence of the theory of stochastic cycles
The movement of the Stochastic indicator between zones 80 and 20 displays the beginning and end of the wave (impulse, or mini-trend). But, my observation showed that it is necessary to take into account not all the intersections of zones 20 and 80 with the Stochastic indicator.
The secret of the practice of using stochastic cycles
And the secret is simple: you need to take into account only those highs or lows of the price at which the stochastic indicator began its journey from zone 80 to zone 20 (down), or from zone 20 to 80 (up).
That is, we do not know when the growing price movement will end until the stochastic, starting from 20, comes to 80, and decreases back to 20 (the bullish stochastic triangle). Also with a falling motion, it will end when the stochastic crossed the zone 80, dropped to 20, and returned back to 80 (bearish stochastic triangle).
Support and resistance levels
As you can see on the EURUSD chart there are a lot of highs and lows in prices. There are many different methods of applying support and resistance levels.
Personally, I like my method - drawing support and resistance levels according to the highs and lows of the stochastic cycle.
The reversal line is the level of the stochastic maximum or minimum, which, as a rule, occurs at the base of the previous pulse. The logic is simple: if the price was able to absorb the previous movement, then a turn in the opposite direction is likely.
How to trade
There are several regularities for entering a trade in stochastic cycles.
1. Bullish and bearish triangle
We waited for the stochastics from 20 to rise to 80, and to fall to 20, entry into the purchase.
We waited until the stochastic dropped from 80 to 20, and rose to 80, the entrance to sales.
2. Retest level
We buy if the price has returned to the previous top of the stochastic cycle.
We sell if the price has returned to the previous low of the stochastic cycle.
3. Entrance to the rebound from the pivot line
We buy when the price bounces from the reversal line.
We sell when the price bounces from the reversal line.
Indicators:
Stochastic, 15.3.3.
Timeframe: H1
Currency: EURUSD
Personally, I only trade the retest level - this is a more likely signal.
Rules for entry into position:
We buy if:
The Stochastic has formed a bullish triangle;
We are waiting for the price to fall to the previous top of the stochastic cycle, we enter the buy.
We Sell if:
Stochastic shaped bearish triangle;
We are waiting for the price to rise to the previous low of the stochastic cycle, we enter the sell.
Exit position:
You can use a fixed profit, or trailing stop.
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