Trading System

4 Hr Stochastic Trading System

Part 1: 4Hr Stochastic Trading System

Time Frame :  4 HourCurrency Pairs:  EUR/USD,

Indicator: Stochastic (14,3,3) Smoothed

Instruction: Open Stochastic on Metatrader 4.Click Intsert – Indicator – Stochastic OscillatorOn the Parameter set: %K period: 14 %D period:   3 Slowing    :   3 MA method: smoothOn the Level set click “add”  20, 50, 80*80 = overbroght level*20= oversold level*50= mid level

How to use Stochastic Indicator?

We trade when the main line (Light Sea Green color) across the Signal (Red) line. If the Main line crossing above the Signal line, it will be a “Long” entry signal. On the other hand, If the Main line crossing below the Signal line, it will be a “Short” entry signal. In addition, you need aware of the level on the Stochastic. Setting up a Level on Stochastic can let you able to Buy low Sell High, which mean you can buy at a lower level (20) and Sell a the over-brought level (80)

Buy when the Oscillator (either %K or %D) falls below a specific level (e.g., 20) and then rises above that level.

Sell when the Oscillator rises above a specific level (e.g., 80) and then falls below that level.

Buy when the %K line rises above the %D line and sell when the %K line falls below the %D line.

Usually this is the most common method to use Stochastic Oscillator.


The way I use Stochastic Oscillator? I understand most of the Stocastic Oscillator setting level is 5,3,3. It is a best way to trade on smaller timeframe. I strongly recommand to use the level of 14,3,3 to trade because it have less false signal than the 14,3,3. Therefore, change your level from 5,3,3, to 14,3,3. Also, change the MA method to smooth so you can clearly see how’s the line crossing more than simple.

How I Entry the trade? Remeber the different between the way I use Stoch is I am not only “Buy Low (20) and Sell High(80)”!Buy when the Oscillator (either %K or %D) falls below level 50 or lower and then rises above that level. Don’t Buy when the %K line is below 20 level (even there have a bullish crossing on stoch)

Sell when the Oscillator rises above a 50 level and then falls below that level. Don’t Sell when the %K line is above 80 level (even there have a Bearish crossing on stoch)

Using Stochastic to trade 4 Hour Chart

Trading 15 minutes using Stocastic may be have more opportunity to make more profit. You could have a trading signal earlier than 4 hour. However, you may not earn more than trading 4 hour because trading 4 hour could earn more than 100 pips on one trade which is 50pips more than 4 Hour trading. On the other hand, Photo Trading Stochastic is 4 Hour ChartStochastic EUR/USD 4 hour chart In this photo you will see how I trade 4 Hour Chart on EUR/USD by using Stochastic Oscillator.

4 Hour Can trade anytime

The good thing about trading 4 hour chart is you don’t need to worry about what is the best time to trade because the momentum is trading the Big picture trend. Beware that you will not know when will the signal appear. What will you do? It simple, you can check the Chart three times a day. Morning, Afternoon and Night. You will be fine because the trend is slow and you are able to trade at the right time. One things you need to beware is if the stochastic almost have a crossing, you need to either stay at your computer or place a pending order on the trade.

Trading Management

This is the most important part of your trading plan because you may end up losing money even though you follow your indicator signal. Here is my trading set up:

Take Profit 50pips:  Set your target take profit 70-120 pips.Stop Loss: 25pips: Set your Stop Loss to 40pipsExit: Opposite Stochastic Line crossing

Advantage/Disadvantage of using Stochastic Indicator

I think any indicator or trading system have their advantage and disadvantage. The good things about using Stochastic is you really see the price movement and able to make small profit in a short period of time. On the other hands, you may not able to see a Big Picture of Trend of the Market. For example, if EUR/USD big trend is Bearish (Going Downward), the stochastic crossing indicator is Bullish (crossing upward). By following the Stochastic indicator you end up like making a small profit first, and all of sudden you are turning profit into a big net loss because the small trend is going back to the main trend.

The Real Truth of Stochastic

Stochastic is definitely is a good indicator to trade Forex. It is really fast signal indicator which you know exactly how the trend is going Right A Way.You are able to enter the trade at a Right time.

How to earn profit using Stochastic Oscillator?

As I said before, Stochastic is the Fast Signal Indicator. By using Stochastic Oscillator successfully, you need to combine with a Slower trend indicator. When combine those two together you will be see both the Big Picture Market and able to execute the trade at a Right Time.