The Stochastic + Trend Trading Method

Indicators:

• Bollinger Bands (20, 2, 0, close) or any channel indicator

• Stochastic (5, 3, 3)

Key conditions:

The timeframe should be at least M30. Avoid trading during flat periods. Do not trade before and after news releases.

BUY conditions (all conditions must be met):

• the price is turning up from the lower border of the channel

• the fast oscillator line crosses the slow one from the bottom up in the oversold zone

SELL conditions (all conditions must be met):

• the price is turning down from the upper border of the channel

• the fast oscillator line crosses the slow one from top to bottom in the overbought zone

Exit criteria: exit the trade when a reverse signal appears.

Exercise

Open a chart with a timeframe of at least M30. Apply the Bollinger Bands indicator with settings (20, 2, 0) or another channel indicator of your choice. Add the Stochastic oscillator with settings (5, 3, 3). Ensure that you are not trading during flat market periods and avoid trading before and after news releases.

Look for a BUY signal when the price turns up from the lower border of the channel and the fast Stochastic line crosses the slow line from the bottom up in the oversold zone. Enter a long position on the next bar after the Stochastic lines cross and set a stop-loss below the recent swing low. Monitor the trade and exit when a reverse signal appears.

Repeat the process for a SELL signal by identifying when the price turns down from the upper border of the channel and the fast Stochastic line crosses the slow line from top to bottom in the overbought zone. Enter a short position on the next bar after the Stochastic lines cross and set a stop-loss above the recent swing high, exiting the trade upon the appearance of a reverse signal.