Stochastic - page 3

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Using this first condition inside Technical Analysis.

I created simple template for us - download attached file and place it to template folder (for example - to C:\Program Files\MetaTrader 5\Profiles\Templates). After that - open EURUSD H1 chart, right mouse click, select Templates - our template by name. And you will see the chart similar with this one:

MetaTrader Trading Platform Screenshots

EURUSD, H1, 2013.06.06

MetaQuotes Software Corp., MetaTrader 5, Demo

eurusd h1

EURUSD, H1, 2013.06.06, MetaQuotes Software Corp., MetaTrader 5, Demo


Files:
100ma.tpl  9 kb
Clock.mq5  9 kb
 

This is very simple setup related to technical analysis:

  • Moving Averages indicator with period 55, method - simple, apply to close.
  • Moving Averages indicator with period 100, method - simple, apply to close.
  • Stochastic indicator with the settings 100/8/8

This kind of setup is used for technical analysis. But why the traders are not trading their technical analysis setups? we watched tv ... we are reading some threads about support resistance levels and so on. Why they are not connecting their setups/EAs to the Signals? because this Stochastic condition (overbought/oversold) are not coming on the same bar with the main signals to open buy/sell trade. Let me explain more.

 
I created very simple EA based on this condition:
  • Moving Averages indicator with period 55, method - simple, apply to close.
  • Moving Averages indicator with period 100, method - simple, apply to close.
  • Stochastic indicator with the settings 100/8/8
EA is attached.
Files:
200mav1.mq5  82 kb
 

Let's optimize the settings of this EA. I optimized it using cloud but for take profit, stop loss and trailing stop only. Set file (or pre-set file) is attached.

What is set file? This is the settings fo the EA. Place it to template folder, and you can use it during attaching EA to the chart clicking on Load button:


 

I optimized the settings of this EA (for tp, sl and ts only):



Files:
optimeurusdh1.zip  54 kb
 

And I made backtest for 1 year:



Backtesting results and set file (settings of the EA) are attached.

Files:
backtest1year.zip  59 kb
eurusdh1.set  3 kb
 
And what do we see? we see that it is profitable but it is 7 trades only for one year.
 

And this is backtest for 3 years:



Files:
backtest3year.zip  68 kb
 

Profitable? Yes. But it is 15 trades only for 3 years. Why? because this overbought/oversold condition of Stochastic indicator is not coming on the same bar (most of them are not coming) with main signals from some other indicators to open the trades.

That is why we call this first signal from Stochastic indicator as technical analysis condition (condition which is usually used for technical analysis).

Forum

Stochastic

newdigital, 2013.06.06 14:56

so we go :)

Let's discuss the first usually used signals/condition of Stochastic: main line of indicator is above or below some level indicating overbough/oversold

As I said - Stochastic is used as a filter so the traders are using the term 'condition' instead of 'signal' of the indicator. And it is especially related to this first condition: value of indicator is above or below of some level. When and why some traders are using this kind of condition for EAs and for manual trading? They are using it on the following cases:

  • technical analysis. If you watch TV (i do not like TV but ... watching just in case ... ) - you can listen something as "this pair is on overbought condition". How do they know it? It is very simple: they attach indicator to metatrader ... may be - they attached Stochastic. So, what is the difference between them and us? They can "read" chart ("read" in direct meaning - same as the book or article), but many traders - can not.
  • trading. people are using this kind of condition when they want to filter many false signals. For example, some trader/developer is creating trading system and he is receiving a lot of signals for buy and sell. And some (or most of) the signals are false signals. So, the developers are using this condition to filter (to cut of/to reduce) false signals inside some trading systems.


more to follow ...

 

But to say the true ... slow MA period should be 200 instead of 100. I used 100 because I did not get any single trade for one year ... :) so ... if you are estimating market condition in the beginning of the trading day - use this setup with MA period 200:

Forum

Stochastic

newdigital, 2013.06.06 15:06

I created very simple EA based on this condition:
  • Moving Averages indicator with period 55, method - simple, apply to close.
  • Moving Averages indicator with period 100, method - simple, apply to close.
  • Stochastic indicator with the settings 100/8/8
EA is attached.

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