Stochastic EMA Forex Trading Strategy is based on an indicator that pinpoints crossovers of the stochastic oscillator. As a base indicator, this indicator often gets the swing points right as the stochastic oscillator’s crossover points usually correspond to a short-term reversal.
To gain the odds of a successful trade, only signals generated by this indicator that agree with a fresh strong trend and is generated when the Stoch oscillator is on an overextended market condition will be taken.
To determine the trend, aside from visually seeing the price move in a certain direction, we would also be using the commonly observed 50 Exponential Moving Average (EMA) as our basis for a trend.
A bullish market condition would have a price above the 50 EMA and have a 50 EMA that is sloping up. A bearish trend would be the opposite, with the price below the 50 EMA and the 50 EMA sloping down.
Indicators:
- Stochastic Oscillator
- %K period: 5
- %D period: 3
- Slowing: 3
- Stochastic_Cross_Alert
- Default parameters
- 50 EMA (green)
Timeframe: 1-hour and 4-hour chart
Currency Pair: Any
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How to trade with Stochastic EMA Forex Trading Strategy?
Buy (Long) Trade Setup Rules
Entry
- Price should be above the 50 EMA
- The 50 EMA should be sloping up
- Wait for the stochastic oscillator to go back to the oversold area below 20
- Wait for a green Stochastic_Cross_Alert arrow pointing up to appear
- Enter a buy market order by following the above rules
Stop Loss
- Set the stop loss on the swing low below the entry candle
Take Profit
- Set the take profit target at the most recent swing high
Sell (Short) Trade Setup Rules
Entry
- Price should be below the 50 EMA
- The 50 EMA should be sloping down
- Wait for the stochastic oscillator to go back to the overbought area above 80
- Wait for a red Stochastic_Cross_Alert arrow pointing down to appear
- Enter a sell market order by following the above rules
Stop Loss
- Set the stop loss on the swing high above the entry candle
Take Profit
- Set the take profit target at the most recent swing low
How to download and install an indicator?
In order to install the indicator on your MT4 platform, you need to follow these steps:
- Click on the “Download Indicator” button located at the bottom.
- Save the file to your computer.
- Extract and move the files into MT4>Indicator folder of the MetaTrader 4 software file directory.
- Restart your MetaTrader platform.
- Navigate to “Indicators.”
- And select the “Stochastic EMA Forex Trading Strategy" template to apply it on the chart.
Note: This indicator was developed by T. Morris. AtoZ Markets does not carry any copyrights over this trading tool.
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