This time I decided to use a leading indicator for my live Forex trading video example. Today I will show you how the Stochastic Oscillator Forex trading works. Notice that the indicator is attached to the bottom of my chart and I use it in combination with price action to attain signals on the chart. Also, I modified the Stochastic Forex indicator to its default setting at 14 periods.
Signals of the Stochastic Oscillator Forex Trade
- The Stochastic Oscillator has exited the overbought zone on the M15 chart of the GBP/USD
- At the same time, the price has been created a bearish trend bounce.
- When I zoomed the chart I also noticed a Descending Tops and Bottoms chart pattern.
Stop Loss and Target of the Stochastic Forex Trade
I placed a Stop Loss order above the blue bearish trend line. At the same time, I also took into consideration the previous top on the chart that was slightly higher. This way I felt that the trade is more secured.
Notice that I did not have a general target on the chart. As I stated, I my target depended on the Stochastic line in case of an interaction with the oversold zone. However, I placed a Take Profit order anyway in case the price creates a volatile drop. I chose the support level near the last few bottoms on the chart.
Live Trading Example
Notice that the price created a sharp decrease only in 30 minutes. The GBP/USD nearly reached my take profit order. At last, the Stochastic line hit the oversold area where it finished the current period. I did not wait the price to reach the Take Profit order and I instantly closed my short trade.
Bottom line, the short Stochastic Forex trade generated the impressive 25 pips or 0.25% for only half an hour. I wish you all trades like this one!