Simple Scalping using the 9,4,3 Stochastic
In this article I will be sharing a very simple Forex trading system. This can be used on the 1 minute or 5 minute chart and if done right, can prove itself to be very profitable.
Future plans: This is my first “trader’s” strategy. My plans for this are to set out a trading strategy and to also accompany it with a Metatrader 4 Expert Advisor. We’ll start simple and build up a strategy from here.
Stop loss and take profit
The most challenging thing for a trader is when to let go and sell, be it a loss or a profit. When executing the order, set your stop loss to be about 10-20 pips and the Take Profit to be about the same. This way you have an even up/down with a minimal loss. The lower the spread the better. Under 2 pips is ideal. Most major currency pairs (USDJPY, EURJPY, USDCAD) have low spread.
Especially for beginning traders, what to set each indicator to can be a confusing and daunting task. There’s a million settings and combinations that’ll make anyone’s head explode. The following are simply guidelines to push you to your own path.
- Stochastic 9,4,3. This stochastic is use for determine the buy and sell trading signal in short term time frame. M1 to M15.
- Stochastic 12,4,12. This stochastic indicator is use for identify the buy and sell trading signal in medium term time frame. M30 to 1H.
- Stochastic 24,4,24. This stochastic indicator is use for identify the buy and sell trading signal in long term time frame. 1H to the daily.
Now that we’ve established a simple setup for the Stochastic, we need to define clear rules of when to buy, or known as Short/Long.
Go Long: When all of stochastic oscillator lines are in oversold level (Under 20), and the signal line crosses over the main line in an upwards move.
Go Short: When all stochastic oscillator indicators are in overbought level (Over 80). Open a short position (sell order) and hope it hits the pips quick.