Stochastic Star Option Strategy For MT4
The Stochastic Star Option Strategy For MT4 works with the polynomial regression formula and market momentum. Whenever any trading method uses the regression formula, the accuracy of the entry and exit point increase significantly.
The major portion of the institutional traders depends on the regression-based trading model to improve their accuracy. COG, Star alert, and the stochastic indicator are used to create the template. Before we get to the trading steps, we have to get a very clear idea about the regression line. Regression analysis is the statistical estimation between the dependent and independent variables.
The formula that is used to construct the strategy, focus on the market momentum and strength of the asset. Based on that it creates a linear path that works as the dynamic level for trading. Unless you are used to the regression-based trading model, it will be a bit hard to formulate with the trading approach. But you don’t have to worry about this method as every single step will be elaborately described in this article.
Even if you are a complete beginner, having a sound knowledge about the support and resistance level is enough to curate profitable trade with this pro trading model. However, we are not going to depend on the regression line only as we will consider some important filter that can help you pass some trade setup.
At times, learning to stay away from the market can help you to achieve success. Let’s see how we can make money with the call and put option using this system.
Call option setup
We are assuming that we don’t have any in-depth knowledge of the market. The call option means you are expecting the price of the asset to go higher. So, from which point the price will start its rally? The buyers need a strong support zone from which they can gain the bullish steam.
The green start profit channel is going to be our support line. But notice we have three lines of support so it might create a dilemma which level we will take the call option. This is where we have to depend on the closing of the candle. We need a bullish candle that will test the green line and close above that line. The reason for the bullish closing is to get the confirmation that the price has not yet breached the support level.
Before you get a valid bounce from the start channel or the green zone, you have to analyze the reading of the stochastic curve. The stochastic curve will be at the oversold zone stating the bears are exhausted and its time for the buyers to create a new high. Finally, we will be waiting for the green star mark to consider it as a perfect trading signal.
You now know a very powerful way to execute the call trade in the options market. Though the steps are very simple the association of linear regression formula helps to improve the win rate. While opening a new trade, risk only 2% of the balance even though you are confident with your trading edge.
Put option setup
The resistance level is the zone or point where the price rally stops. The bears come to the market and push the price a new low. The purple color star channel is going to act our resistance line. Since we have three resistance line, you have to carefully analyze the closing of the bar for the perfect entry point.
The high of the candle might test the purple line but the close must be below the purple band or the purple start channel. Before the closing of the bearish candle, the cross in the stochastic indicator will be bearish. This means the blue line will push below the red dotted line from the 80 zones. 100-80 zone is the perfect point where the sellers kick in.
If the reading is not in that range, you might be analyzing a false trade setup. Wait patiently for the purple color star mark to appear above the chart. The purple star is the indication for your put option. Those who are bit smart can focus on the slope of the star channel usually the star channel will be tilted to the south when the trend is bearish.
So, the execution point at the tilted point is an excellent way to short the asset. The maximum risk you can take with this method is only 2%. Some of you might get greedy or emotional by taking a high risk in the market. But this is like a trap set by the market. By any means, you must take control of this greed and stick to the original trading method. If you lose two trades in a row, take the day off and get ready for the next day.
Trade management skills
Managing your trade with this model is a very simple way. People get confused when they focus on profit factors only. As a retail trader, it is better to maintain a low-risk profile so that you can withstand a few losing trades with this system. To improve your skills as a currency trader, test this method in the demo environment.
After you feel confident with the system, make the switch to the real environment. The novice traders might get confused with the new environment and might suffer from the FOMO symptoms. This is nothing but Fear OF Missing Out the trade. The trades will be early executed before the formation of the star mark and this will be causing you trouble.
You can miss some trade there is nothing wrong but don’t forget to use the filter actively. Regarding the expiry, the analytical chart plays the most crucial role in the trading model. If the trades are taken in the 5-minute chart, the expiry period should be 5 minutes.
If the trade is taken in 1 hour the expiry will 60 minutes. But increase the risk threshold as you get to the higher time frame. The risk profile should stay the same regardless of your preferred time frame.
Download the complete system description and the files here: