Trading Zone with Stochastic Trading System For MT4

Trading Zone with Stochastic Trading System For MT4

 

Table Of Contents:

  1. Trading Zone with Stochastic Trading System For MT4
  2. Indicators Used and Time Frames
  3. Trading Strategy
  4. Long entry
    1. Stop Loss and Take Profit
  5. Short entry
    1. Stop Loss and Take Profit Settings
  6. Conclusion

 

Please note: This strategy was publicly published in the trading community and is free to use. We do NOT make an attempt to decide if this strategy is profitable or not, because we know that the major factors regarding trading results are the skills/experience of the trader who executes the strategy. Therefore, we are mainly explaining the components and rules of the strategy. If applicable, we are highlighting advantages, disadvantages and possible improvements of the strategy.

 

The Trading Zone with Stochastic Trading System For MT4 is a price action strategy that relies on what is known as "waves arrows trading". Do not be confused by this term as it will be explained in words and snapshots in the ensuing strategy article.

The Trading Zone with Stochastic Trading System For MT4 is based on the use of the waves arrows. These are arrows that point at specific buy and sell areas on the price chart, with guidance from other indicators that confirm the signals. If you have been searching for an intraday trading signal that delivers on a short term chart, this is the strategy for you.

Here is the explanation of the critical elements involved in the Trading Zone Stochastic Trading System For MT4.



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Indicators Used and Time Frames

 

This strategy is built for use on several asset classes. It works very well on currency pairs and has been developed for use on short-term time frames such as the 30-minute chart or the 1-hour chart.

A total of four indicators are used to create the elements of this strategy. These indicators are:

 

    • Wave Arrows indicator

 

    • Pivot points indicator (shifted to keep the previous pivots intact on the charts for reference).

 

    • Traders Zone Indicator, from where the strategy derives its name.


    • Stochastics oscillator, set to 14,3,3.

 

So what do these indicators do as part of their roles in the strategy composition?

The Waves Arrow indicator is a sequence of arrows that appear above or below the price candles/bars, whenever they approach a pivot point and set up in a manner that is considered tradable. The arrows are colour-coded; red downward arrows are a sell signal, and green upward arrows are a buy signal.

The Pivot point indicator sets lines across the possible intraday support and resistance levels. 7 pivots are identified, and these are automatically recalculated everyday using the previous day’s highs, lows and closing prices. The version used here retains the previous pivots, so the trader can use them as support and resistance references.

The Stochastics oscillator is a momentum indicator which has a fast and slow moving average line. The cross of the fast line above and below the slow line, in a market extreme area is the defining signal produced by this indicator. 

The Trading Zone indicator plots a series of vertical bars which are also colour-coded, Red signal bars indicate a selling zone, while green signal bars indicate a buying zone.

The signals produced by these four indicators for the buying and selling areas must all align in order to produce signals that can be traded with a good degree of accuracy.


Trading Strategy

 

The trading strategy combines the various indicators in defining price direction for the short term. The momentum indicator (Stochastics) defines the market extremes, while the Waves Arrow and pivot points define the proper entry points. Prior resistance and support areas are used to define profitable exit points, and you may find that a prior support or resistance may be the same spot shown by a pivot point of days gone by.

So how can you go about this? First, we will examine how to buy at support when the market is oversold.

 

  1. Long entry

 

These are the parameters to look out for when trying to buy at support when the asset is oversold.

 

    • The Waves Arrow indicator appears with a green colour, on top of a pivot point.

 

    • The Stochastics indicator lines should cross in the oversold area of the indicator window.

 

    • The Traders Zone indicator should show a lime green in its window.


    • Initiate the Buy order at the open of the next candle, so you are sure that the Waves Arrows indicator does not repaint.



Take a look at the snapshot shown below. The snapshot shows two areas where valid long entry setups were seen. In this example, the pivot points were support pivots, which allowed the trades to have enough room to deliver the required mandate.

 

Stop Loss and Take Profit

The positioning of the trade setups just above the pivot points allow for the setting of tight stops. In any case, the Stop Loss should be set below the lowest point of the cluster of candles that surround the entry point. The risk-reward ratio should be set at 1:3, which means 1 pip risked as stop loss must be accompanied by the pursuit of at least 3 pips as the Take Profit level.

Set the Profit Target using a prior resistance as the guide. The TP is set below the prior resistance so this price level can be triggered before the prior resistance is hit.

 

  1. Short entry

 

What do you look for when trying to detect an opportunity for a short trade? Check for the following parameters on the chart:

 

    • The Waves Arrow indicator should be showing red arrows, just under a pivot point.

 

    • The Stochastics indicator lines should cross in the overbought indicator zone.


    • The Traders Zone indicator should also show red lines. Take the trade at the open of the next candle to ensure that the Waves Arrow indicator has not repainted.



The snapshot above reveals how a short trade setup should look like. There were two valid setups, but the third instance where the Waves Arrow appeared did so when the Stochastics oscillator had left the overbought zone. This rendered the 3rd setup invalid. 

 

Stop Loss and Take Profit Settings

Set the stop loss price above the highest point of the cluster of candles that are located around the entry pivot point.

While ensuring that you obey the risk-reward ratio that mandates a minimum of 3 pips in the profit target for every 1 pip set as stop loss, set the TP using a prior support as the benchmark. This TP is set a few pips above this reference price target.

 

Conclusion

This is yet another strategy that gives specific entry and exit points using several indicators. This can be used as an intraday strategy, taking advantage of short bursts of price movement that occur within assets within a trading day.

Download the complete system description and the files here:

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