Stochastic Trading System - Highly profitable

[M256]

Its a system I have recently developed, inspired by Jake Bernstein's great book, The Complete Day Trader. I changed a bit the stop loss and exit rules to make the profits run a bit more.
I call it Stochastic OBOS, for Over-Bought-Over-Sold..
This is basically a trend following system, works well in trend phases. I sometimes filter the trades with Range Indicator to avoid ranging periods.

Pairs
Works best on GBPUSD\EURUSD\GBPJPY

Charts
I use this system on 15M\1H\4H. Of course, If there are conflicting signals the higher timeframe wins...

Indicators
*Stochastic Oscillator (K%=10, D%=3, Slowing=3), remove the signal line (slowing) as you won't be using it here.
*Awesome Oscillator

Entry Rules
Enter Long after Stochastic main line crosses 60 up.
Enter Short after Stochastic main line crosses 40 down.
Stop order is placed 1 pip above the high of the candle (for long), and 1 pip below the low of the candle (for short).

Exit Rules
Exit trade when Awesome Oscillator makes one bar in opposite direction of your trade. Explanation:
If you are long and Awesome Oscillator creates a red bar - exit trade when the bar is closed.
If you are short and Awesome Oscillator creates a green bar - exit when bar is closed.
Just look at the pictures.. it doesn't really matter to be 100% precise in these exits, anyway the trends you'll catch are big enough so late exits won't hurt the profits too much.

Money Management
As usual I recommend not risking more than 2% of equity on a single trade.

Visit my blog for more Free Trading Systems and Indicators.

[longman]

Could you tell us why we don't Enter Long after Stochastic main line crosses 40 up. And enter Short after Stochastic main line crosses 60 down for taking early position? Sometime It takes position too late as your entry rules. Anyway, thank you very much for your posting

[M256]

Originally Posted by longman

Could you tell us why we don't Enter Long after Stochastic main line crosses 40 up. And enter Short after Stochastic main line crosses 60 down for taking early position? Sometime It takes position too late as your entry rules. Anyway, thank you very much for your posting

I encourage you to try it and tell us how it worked.
I have found out that the 60-40 levels worked best for the time period I checked (2006-7 in backtest, few months of forward testing).

And you are welcome.

[sholmes9000]

hi....quick question. what if main line stoch crosses 60 but awesome osc is red, can we still take trade on long side....? vice versa for short, when stoch crosses 40 from above but awesome osc is green....can short? tks....

[M256]

Originally Posted by sholmes9000

hi....quick question. what if main line stoch crosses 60 but awesome osc is red, can we still take trade on long side....? vice versa for short, when stoch crosses 40 from above but awesome osc is green....can short? tks....

Yes we can!

[mikeoreg]

nice simple system will demo trade and see what happens.thanks for sharing

[parsfx]

result Gu.
demo acc.

[aliadji]

Could anyone share how to filter false moves before the right move come?

[bestforexsoftwares]

Originally Posted by aliadji

Could anyone share how to filter false moves before the right move come?

False moves are caused by existing trendlines or broken trendlines...You need to draw out yourself to see the possible resistance or support...

Anyway Stochastic trading can get you right at the start of the move...so generally you will have more breathing space to absorb the false breakout...

[fxtrendline]

Originally Posted by bestforexsoftwares

False moves are caused by existing trendlines or broken trendlines...You need to draw out yourself to see the possible resistance or support...

Anyway Stochastic trading can get you right at the start of the move...so generally you will have more breathing space to absorb the false breakout...

I agree with that , anyone who need free ebook on what's the trend is , please pm me