Stochastic is very popular for scalping. There are many reasons for that – signals are fast and it allows you to open positions in good places.
Parameters are very important here. Even small changes result in different signals and lines you see in Stochastic. In scalping, popular are fast parameters because thanks to them you have fast signals. Popular settings are 13, 3, 3, but my recommendation would be to go with little bit bigger numbers – 15, 5, 5 like on the screen below:
Next thing to decide is Price field. You can set standard Close or go with Low/High. I prefer the second one.
MA method – I suggest expotential.
Remember: these are only my suggestions. You may be trading different pairs, different time frames and you may need other settings. That is why this is very important to check your settings based on price history.
There are few ways you can open and close your trade. You can do it after a cross of signal lines just like in the example below:
Or you can wait for confirmation and close above or below 20 and 80 lines. If stochastic is below 20 line that means that price is oversold if it is above 80 line that it means that it is overbought. We may have multiple signals in that areas so it is a good idea to wait for confirmation from Stochastic and cross of signal line with 20 or 80. Compare the chart below with the previous chart and it should be clear for you:
It is best to build a system around Stochastic. I mean by that joining Stochastic with other tools so you can have a confirmation of signals. You can add basic moving averages like 50, 100 or 200 so you can have a confirmation of a trend. Another way is to draw trendlines, look for patterns. When you join it together you can have very good entry and exit signals and your scalping will be much more effective.
Stochastic can help us to enter a trade when a price is getting near to the important support or resistance line. In the example below we have Pivot line, we know from higher TF that trend is up. We want to enter long position near Pivot, but after some confirmation. Sure enough, we had a confirmation from Stochastic oscillator and it was a very good place to enter a trade:
Of course, you can join Stochastic with other tools. In the example below, you can see Fibonacci joined with Stochastic. We waited here for correction to C so we can go long near one of the retracement lines. We go long after confirmation from stochastic and as you can see this was a very good place to enter a trade:
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