The Stochastic Indicator Applied to EUR/USD

Looking for the Holy Grail, the miracle indicator that will do everything for them and especially make them earn fortunes everyday, here is the daily quest of many traders.

This quest for the improbable answer takes them away from the principal. What if the solution wasn't much simpler？ ... Just knowing how to use a few basic indicators they have on any chart platform.

I am going to talk about an indicator that I particularly like, I mean the stochastics.

I will not develop here the standard way to use it, i.e. using the levels placed at 80 and 20 to determine an area of overbought or oversold.

In fact, we can use the stochastics differently.

For this we will have to identify the support or resistance levels and take an interest in the stochastics when the curve breaks one of these lines, while the stochastic cuts its signal line.

The more the latter will be cut near the line of 80 in case of a buy or 20 in case of a sell, the more interesting the signal will follow, contrary to what is recommended by most traders.

Take the time to look at the graphs in the past and you will see the merits of this technique. An interesting time frame to work with this is in one hour period, but you can test this technique in other time frames.

Here are the examples that let you know better the principle of this method:

The No.1 on the chart marks a final high.

In the No. 2, the green candle cuts this higher. Simultaneously the stochastic cuts its signal line at the point marked in the No. 2. This happens at the level 80 of overbought. Most traders are then reluctant to start a trade and yet ... at the next candle that it was possible to earn 58 pips!

In the No. 3, the red candle cuts the support line drawn in red, compared to previous lows and simultaneously the stochastic cuts its signal line at the No. 3 and this below the oversold line of 20 ... I am sure that many traders did not start this trade because we were oversold and yet ... there was a possibility to gain 60 pips in a short term.

In the No. 4, the red candle cuts the support line and the stochastic cuts its signal line at the same time, that was to gain 67 pips in a short term...

(Source: https://www.abcbourse.com/analyses/chronique-l_indicateur_stochastique_applique_a_l_eur_usd-673)