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STOP USING TIMEFRAMES LOWER THAN 1 hour, increase profits

I would just like to tell all new forex traders who are trying to make money from trading to stop using 1min, 5 min, 15 min or 30 min for trading.

If you want to be successful in forex trading use 4 hr charts with daily charts as confirmation.

Currently I am trading using stochastics 8,3,3 on MT4.

I basically check the DAILY Charts(also check weekly charts for safer trades) to see what direction the stochastics are.

I then zoom to the 4 hr charts and these is what I do

If the 4 hr charts stochastics are not agreeing with the daily, I then wait for the 4hr stochs to reach the overbought or oversold and then once it starts agreeing I would take the trade.

I set my stop loss on the last swing(high/low) and usually I would seek to get a 1 to 10 ratio in winning trades. I usually divide my trade into 2 orders in which one is to capture a smaller R/R ratio and the rest is to capture as much as possible.

THis has worked real good especially in this EURUSD market of the strong downward trend .

But basically most simple strategies like MACD crossover, EMA crossover overbough/oversold. Work like magic on the timeframes 4hr or higher.

Try it. you could comfortably be getting 30% or more returns monthly easier than trying to get that in a day or 1 week.

That's only one of many strategies, Bosoko. If you feel confortable with, good for U. But in this forum you will find many and very profitable for different TF. Depends of your trading style.

Stoch is a very good indy, but if you want some advice, don't use it as a stand-alone indicator. Remember, It's an oscillator. You can place a fast ma in yor chart also (due to the fact you are trading in bigger TF) or other trend indy of your preference. Many and good here. Browse and choose.

I would just like to tell all new forex traders who are trying to make money from trading to stop using 1min, 5 min, 15 min or 30 min for trading.

If you want to be successful in forex trading use 4 hr charts with daily charts as confirmation.

Currently I am trading using stochastics 8,3,3 on MT4.

I basically check the DAILY Charts(also check weekly charts for safer trades) to see what direction the stochastics are.

I then zoom to the 4 hr charts and these is what I do

If the 4 hr charts stochastics are not agreeing with the daily, I then wait for the 4hr stochs to reach the overbought or oversold and then once it starts agreeing I would take the trade.

I set my stop loss on the last swing(high/low) and usually I would seek to get a 1 to 10 ratio in winning trades. I usually divide my trade into 2 orders in which one is to capture a smaller R/R ratio and the rest is to capture as much as possible.

THis has worked real good especially in this EURUSD market of the strong downward trend.

But basically most simple strategies like MACD crossover, EMA crossover overbough/oversold. Work like magic on the timeframes 4hr or higher.

Try it. you could comfortably be getting 30% or more returns monthly easier than trying to get that in a day or 1 week.

You are right my friend!

After many years of investing in Forex, I have realized the same as you have. I have probably 4,000 or more indicators and never could make any ea I created work on short timeframe trading with consistency. The big boys play with longer timeframes, and so should we - Excellent wisdom!

2008.09.05 19:26 2008.09.05 21:26:51 #3

Different Strokes For Different Folks

After many years of investing in Forex, I have realized the same as you have. I have probably 4,000 or more indicators and never could make any ea I created work on short timeframe trading with consistency. The big boys play with longer timeframes, and so should we - Excellent wisdom!

2008.09.10 18:31 2008.09.10 20:31:21 #4

I actually didnt write all my strategies, I use MACD and Trendtriggermod on daily then make my decisions on 1 hr using stochs, and MACD fibonacci retracements . I usually would get 2 trades a month but with the fibonacci levels I could set a really good risk to reward ratio of 1 to 4 or even 5(GBPUSD).

But that is true.

Im happy to see someone agrees, after I realized this and started trading real money and making real money by using strategies on 1, 4 or daily timeframe.

I always tried to search for forex strategies based on 4hr or daily and could only find the MTF stochastics.

In fact I believe if someone was to simply code an EA based on MACD crossover on daily timeframe, they would make money.

I use discretion in my trading, because I use fibonacci levels alot but I wish someone should try that for an experiment.

After many years of investing in Forex, I have realized the same as you have. I have probably 4,000 or more indicators and never could make any ea I created work on short timeframe trading with consistency. The big boys play with longer timeframes, and so should we - Excellent wisdom!

2008.09.11 12:43 2008.09.11 14:43:58 #6

Of course longer timeframes are better to use,coz it is less market noise there!I personally trade 30min and higher now.

How about trading a 15 minute time frame if your indicators on the hour and 4 hour concur with the direction?

That could work, but it would be good to zoom out(on 15 min timeframe) so you could see what others using higher timeframes see. The market movers use higher timeframes.

You gain sanity and consistency in your trading once you trade less and make more per trade.

You also will eventually gain the freedom that most are looking for(ie, lots of free time + six figure salary, while building wealth). Whats the use of spending 10 hours looking at charts when you could be glancing at it probably once every hour, or 4 hours.

Im not tryna ramble, but if a new trader could realize this it could quickly cut their time to profitability.

I like higher time frames as well, but I'd be careful with some of your assumptions.

I started watching currencies around 2003-4, when the pairs were strongly trending (like now). I saw similar trading ideas then in forums, ebooks, etc.. People were convinced they'd work forever, talking about 30% per month, 40 pips a day, etc.

Things changed in early 2005. Ranges shrank, and indicator-based trend-following stopped working. This is true for higher time frames as well, as I tested many strategies in that period. Markets finally moved back to trend mode as the credit crunch started 2 years later. The EURUSD started a major uptrend and is now in a downtrend. But don't expect to last forever. At some point, pairs will level out at supposed "fair value" levels, and it may take months or years for big trends to start again.

I would just like to tell all new forex traders who are trying to make money from trading to stop using 1min, 5 min, 15 min or 30 min for trading.

If you want to be successful in forex trading use 4 hr charts with daily charts as confirmation.

Currently I am trading using stochastics 8,3,3 on MT4.

I basically check the DAILY Charts(also check weekly charts for safer trades) to see what direction the stochastics are.

I then zoom to the 4 hr charts and these is what I do

If the 4 hr charts stochastics are not agreeing with the daily, I then wait for the 4hr stochs to reach the overbought or oversold and then once it starts agreeing I would take the trade.

I set my stop loss on the last swing(high/low) and usually I would seek to get a 1 to 10 ratio in winning trades. I usually divide my trade into 2 orders in which one is to capture a smaller R/R ratio and the rest is to capture as much as possible.

THis has worked real good especially in this EURUSD market of the strong downward trend.

But basically most simple strategies like MACD crossover, EMA crossover overbough/oversold. Work like magic on the timeframes 4hr or higher.

Try it. you could comfortably be getting 30% or more returns monthly easier than trying to get that in a day or 1 week.

Best Stochastic Trading Strategy- Easy 6 Step Strategy

Day trading with the best Stochastic Trading Strategy is the name of the strategy we’ll discuss today. As the name suggests, this is a stochastic strategy suitable for day traders. The stochastic strategy is much the same as the Day Trading Price Action- Simple Price Action Strategy, but the only notable difference is that this time around, we incorporate into our strategy a technical indicator, namely the stochastic indicator. This is the best Stochastic trading strategy because you‘ll be able to identify market turning points with accurate precision.

Warning! This can turn you into a modern sniper elite trader because the Stochastic indicator will only make you pull the trigger at the right time. A modern sniper elite trader only pulls the trigger on a trade when he is certain that he can pull a winning trade.

We at Trading Strategy Guides.com looking forward to developing the most comprehensive library of Forex trading strategies that can really help turn your trading around.

The favorite time frame for the Best Stochastic Trading Strategy is the 15-minute chart because we have taken the time to backtest best Stochastic Trading Strategy and the 15-minute TF came over and over again . If you’re a day trader, this is the perfect strategy for you. The stochastic strategy evolved into being one of the best stochastic strategies because, despite the stochastic indicator being a very popular indicator among traders, they have been using it the wrong way. Our team at Trading Strategy Guides.com interprets the charts and the indicators in an unorthodox way, but at the same time, it’s very productive.

Day trading might not be your thing, but perhaps you’re interested in trading on the higher time frames, like the daily chart. Don’t panic; we have your back, our favorite MACD Trend Following Strategy is the best trend following strategy. For every Forex strategy, we at Trading Strategy Guides.com have developed we make sure we leave our own signature and make it simply the best. You can also read our best Gann Fan Trading Strategy.

Before we move forward, we must define the indicators you need for day trading with the best Stochastic Trading Strategy and how to use stochastic indicator

The only indicator you need is the:

Stochastic Indicator: The stochastic indicator was developed by George Lane more than 50 years ago. The reason why the stochastic indicator survived for so many years is because of the popularity of this indicator and also because it continues to show consistent signals even in this current times.

Without further ado, let’s move straight to the point and:

  • Define what the Stochastic indicator is;
  • How to use Stochastic indicator;
  • What are the Stochastic indicator settings;

The Stochastic indicator is a momentum indicator that shows you how strong or weak the current trend is. It helps you identify overbought and oversold market conditions within a trend. The stochastic indicator should be easily located on most trading platforms.

The Stochastic indicator looks like this:

After extensive research and backtesting, we’ve found that the stochastic indicator is more suitable for day trading while indicator like the MACD is more suitable for swing trading. You should really check out our amazing MACD Trend Following Strategy that we decided to share with our trading community only recently.

Another reputable oscillator is the RSI indicator which is similar to the Stochastic indicator, but we chose it over the RSI indicator because the Stochastic indicator puts more weight on the closing price which by the way is the most important price no matter what market you trade. This strategy can also be used to day trading stochastics with a high level of accuracy.

Let me just quickly tell you how to use the stochastic indicator and how to interpret the information given by this amazing indicator so you can know what you’re trading. When the stochastic moving averages are above the 80 line, we’re in the overbought territory; conversely, when the stochastic moving averages are below the 20 line, we’re in oversold territory.

Please have a look at the chart example below to see how to use stochastic indicator.

So, how does the stochastic indicator work?

The stochastic oscillator uses a quite complex mathematical formula to calculate the moving averages:

%K = 100(C – L14)/(H14 – L14)

  • C = the most recent closing price
  • L14 = the low of the 14 previous trading sessions
  • H14 = the highest price traded during the same 14-day period
  • %K= the current market rate for the currency pair
  • %D = 3-period moving average of %K

See below where to locate the %D and %K lines:

The mathematical formula behind the Stochastic indicator works on the assumption that the closing prices are more important in predicting oversold and overbought conditions in the market. Based on this assumption the Stochastic indicator works to give you the best trade signals you can possibly find.

What about the stochastic indicator setting?

Best stochastic settings for 15 minute chart

The default settings for the stochastic indicator are 14,3,1

Now, before we go any further, we always recommend taking a piece of paper and a pen and note down the rules.

Let’s get started…..

Day trading with the best Stochastic Trading Strategy

(Rules for a Buy Trade)

Step #1: Check the daily chart and make sure the Stochastic indicator is below the 20 line and the %K line crossed above the %D line.

We’re daytrading, but having in mind the higher time frame sentiment and trend.

This is a crucial part of the strategy because we only want to be trading in the direction of the higher time frame trend. Our team at Trading Strategy Guides.com has put a great deal of time in developing the best guide to Trading Multiple Time Frames – The Key to Successful Trading. The multiple time frame concept is important because it can give you a more robust reading of the current price action and more it can help you better time your entry and exit points.

Note*: On the daily chart, it’s not necessarily for the stochastic moving averages to be below the 20 level. They can be moving away from the oversold territory and the signal can still be valid, but it shouldn’t be above 50 level.

Step #2: Move Down to the 15-Minute Time Frame and Wait for the Stochastic Indicator to hit the 20 level. The %K line(blue line) crossed above the %D line(orange line).

This step is similar to the previous rule, but this time we apply the rules on the 15-minute time frame: wait for the Stochastic indicator to hit the 20 level and the %Kline (blue line) is crossing above the %D line (orange line).

The 15-minute chart is the best time frame for day trading because is not too fast and at the same time not too slow.

See figure below:

It is said that the market can stay in overbought and oversold condition longer than a trader can stay solvent. So we want to take precautionary measures, and this brings us to the next step on how to use stochastic indicator.

Step #3: Wait for the Stochastic %K line (blue moving average) to cross above the 20 level

We want to trade smarter, right?

Well, because the %k is the fast moving average it’s enough just to wait for it to cross above the 20 level because the %D line will follow suit. We don’t want to wait too much either as this will result in reduced profit margin.

Right now is the time you should switch your focus to the price action, which brings us the next step of the best stochastic trading strategy.

Step #4: Wait for a Swing Low Pattern to develop on the 15-Minute Chart

What is a Swing Low Pattern?

A Swing Low Pattern is a 3 bar pattern and is defined as a bar that has one preceding and one following bar with a higher low. Here is how to identify the right swing to boost your profit.

A visual representation of the Swing Low pattern can be seen below:

So far, so good, but still we haven’t answered the most important question that a trader has:

Day trading stochastics: When to Enter?

This brings us to the next rule of the Best Stochastic Trading Strategy.

Step #5: Entry Long When the Highest Point of the Swing Low Pattern is Broken to the Upside

Nothing beats an illustration…

So, after following the rules of the Best Stochastic Trading Strategy, a buy signal is only triggered once a breakout of the Swing Low Patterns occurs.

Let’s turn our focus again to the EUR/USD 15-minute chart presented earlier and see how to use stochastic indicator in combination with the Swing Low Pattern.

See chart below:

So at this point, your trade is running and in profit.

Step #6: Use Protective Stop Loss placed below the most recent 15-minute Swing Low

You want to place your stop loss below the most recent low, like in the figure below. But make sure you add a buffer of 5 pips away from the low, to protect yourself from possible false breakouts.

Step #6: Take Profit at 2xSL

Knowing when to take profit is as important as knowing when to enter a trade. The Best Stochastic Trading Strategy uses a static take profit, which is two times the amount of your stop loss.

See figure below:

Note** The above was an example of a buy trade using the Daytrading with the Best Stochastic Trading Strategy. Use the same rules – but in reverse – for a sell trade. In the figure below you can see an actual SELL trade example using the Best Stochastic Trading Strategy.

We’ve applied the same Step #1 through Step#4 to help us identify the SELL trade and followed Step #5 to trigger our trade (see next figure).

Conclusion for this stochastic strategy:

Day trading with the Best Stochastic Trading Strategy is the perfect combination between how to correctly use stochastic indicator and price action. The success of the Best Stochastic Trading Strategy is derived from knowing to read a technical indicator correctly and at the same time make use of the price action as well. We also have training for the best short-term trading strategy.

Our team at Trading Strategy Guides.com doesn’t claim to be perfect, but we have a solid understanding of how the market works. For those of you who are not fans of lower time frames, we recommend the “Fibonacci Retracement Channel Trading Strategy” which can be more suitable for your trading style.

Thank you for reading!

Please leave a comment below if you have any questions about Stochastic Trading Strategy!

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