Stochastic Metals Trading System
This topic should be called: Combining Stochastics with other Indicators, but Stochastic Metals Trading System sounds real nice.
Stochastic Oscillator technical indicator can be combined with other indicators to form a trading system. For our example we will combine it with:
- RSI
- MACD
- Moving Averages Metals Trading Technical Indicator
Example 1: Metals Trading Stochastic System
Sell Metals Signal Generated using Stochastic System
From our metals trading system the sell metals trading signal is generated when:
- Both Moving Averages are moving down
- RSI is below 50
- Stochastic moving downward
- MACD heading downwards below centerline
The sell metals signal was generated when all these metals trading rules were met. The exit metals signal is generated when a trading signal in opposite direction is generated i.e. When the metals indicators reverse.
The good thing about using such a metal system is that we are using different types of metals indicators to confirm the trade signals and avoid as many metals whip-saws as possible in process.
- Stochastic - is a momentum oscillator metals technical indicator
- RSI- is a momentum oscillator metals technical indicator
- Moving Averages Technical Indicator- is a metals trend following metals technical indicator
- MACD- is a metals trend following metals technical indicator
It is very useful to combine more than one metals indicator, as a combination of metals trading signals is better than relying on just a single metals indicator. The metals indicator combinations reinforce each other, and cancel out false whipsaw trading signals.
A metals trend following indicator helps a trader to see the overall picture, while using more than one momentum metals technical indicator gives better & more reliable entry and exit points for trading metals.
The metals indicators combinations & their metals trading signals help to decipher a lot of the metal market activity.
Example 2: Stochastic System
Buy Metals Trading Signal Generated using Stochastic Trading System
For this example the metals trend is clearly upward, but at some point there were a few metals trading whipsaws generated by the stochastic oscillator metals indicator, can you spot them? - So the question is how can a trader avoid trading these metals trading whipsaws?
Well, the answer is that by looking at the other technical metals indicators such as MACD indicator a trader could have avoided the whip saw, even the MACD technical indicator had not given a cross-over metals signal although it was very close to the zero center line level, at the same time the gradient at which moving averages technical indicators turned was not so sharp as to warrant a decisive metals market trend reversal. Well the thing is that it's not so obvious when it comes to recognizing metals market whipsaws: it's 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 indicator is above zero center-line even if the MACD lines are heading downwards then the metals trend is still upwards. As you can see from the above example MACD indicator never went below zero line and afterwards the upward metals trend continued with the MACD technical indicator maintaining above Zero line and continuing to move upwards.
During ranging metals markets Stochastic Oscillator indicator will give the fastest metals trading signals which are prone to whipsaws. This is why stochastic oscillator indicator is best combined with other indicators and the metals trading signals traded are confirmed by another one or two other Metals indicators.
