Stochastic Gold Trading System

This topic should be called: Combining Stochastics with other Indicators, but Stochastic Gold Trading System sounds real nice.

Stochastic Oscillator gold indicator can be combined with other gold indicators to form a xauusd trading system. For our example we will combine it with:

• RSI
• MACD
• Moving Averages

Example 1: Gold Stochastic Trading System

Sell Gold Trading Signal Generated using Gold Stochastic Trading System

From our gold trading system the sell gold signal is generated when:

1. Both Moving Averages are moving down
2. RSI is below 50
3. Stochastic heading downwards
4. MACD moving downwards below center-line

The sell gold signal was generated when all these gold trading rules were met. The exit gold signal is generated when a signal in the opposite direction is generated i.e. When the gold indicators reverse.

The good thing about using such a xauusd trading system is that we are using different types of gold indicators to confirm the gold trade signals and avoid as many gold trading whipsaws as possible in the process.

• Stochastic - is a momentum oscillator gold indicator
• RSI- is a momentum oscillator gold indicator
• Moving Averages- is a gold trend following gold indicator
• MACD- is a gold trend following gold indicator

It is very useful to combine more than one gold indicator, as a combination of gold trading signals is better than relying on just a single gold indicator. The gold indicator combinations reinforce each other, and cancel out false whipsaw gold signals.

A gold trend following indicator helps a gold trader to see the overall picture, while using more than one momentum gold indicator gives better and more reliable entry & exit points for trading gold.

The gold indicators combinations and their gold trading signals help to decipher a lot of the xauusd market activity.

Example 2: Gold Stochastic Trading System

Buy Gold Trading Signal Generated using Gold Stochastic Trading System

For this example the gold trend is clearly upwards, but at some point there were a few gold trading whipsaws generated by the stochastic oscillator gold indicator, can you spot them? So the question is how can a gold trader avoid trading these gold trading whipsaws?

Well, the answer is that by looking at the other technical gold indicators such as MACD gold indicator a gold trader could have avoided the whipsaw, even the MACD indicator had not given a crossover gold signal although it was very close to the zero center-line level, at the same time the gradient at which the moving averages turned was not so sharp as to warrant a decisive gold market trend reversal. Well the thing is that it’s not so obvious when it comes to recognizing gold market whipsaws; it is a skill that takes some time but after some time you can spot whipsaws from a mile away.

One tip is that as long as MACD gold indicator is above zero center-line even if the MACD lines are heading downwards then the gold trend is still upwards. As you can see from the above example MACD gold indicator never went below zero line and afterwards the upward gold trend continued with the MACD gold indicator maintaining above Zero line and continuing to move upwards.

During ranging gold markets Stochastic Oscillator gold indicator will give the fastest gold trading signals which are prone to whipsaws. This is why stochastic oscillator indicator is best combined with other gold indicators and the gold trading signals traded are confirmed by another one or two other Gold indicators.