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

1. The Stochastic Oscillator has exited the overbought zone on the M15 chart of the GBP/USD
2. At the same time, the price has been created a bearish trend bounce.
3. 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!

Muhammad Awais