How to trade stochastic oscillator
The Stochastic binary options strategy involves the use of two stochastic indicators. Each indicator has its own setting period. This is done in order to get rid of the false signals sent by the indicator with a shorter period, and also to avoid delays that happen with an indicator with a large period.
Trading with such a combination it might look simple but you need some technical analysis experience to become successful.
Traders should wait until both stochastic indicators are in the oversold area, turned around and then buy Call options. If both indicators were in the overbought area, you must wait their turn and then buy Put options.
How to use the Stochastic Oscillator?
As a part of the technical analysis, some traders use the Stochastic Oscillator. By its application together with other auxiliary tools traders greatly increases their chances of success. This is due to the fact that if the Stochastic indicator has a short period, it will give a lot of false signals. If you use a longer period, the indicator will be delayed.
That is why, the Stochastic binary option indicator can be used to identify areas where a trend will emerge or terminate. At the same time, such a definition is based on overbuying or overselling of an asset. As noted above, the indicator Stochastic can be used with other auxiliary tools. Also quite often binary options traders use the second Stochastic.
It is believed that this is an easy to use indicator and gives high results. You can also test some additional binary options methods, based on the indicators.
How to trade the Stochastic strategy?
So, the strategy uses two binary options Stochastic indicators. In order to make their use justified, they have different timing periods. Different instruments can be used working with these indicators. You must use graphics, which have the possibility of exhibiting temporal scales.
The main indicator of binary options must include the amount of 21, 9 and 9. Additional indicator settings will have 9, 3 and 3. The second indicator has a shorter period and will be alive to respond to all market changes.
An upward trend reversal will occur when both Stochastic indicators are in the oversold area. Thus, at each of its two indicators the lines intersect each other. At this point, you must wait for the close of the current candle, which appeared to signal of a trend reversal.
If the signal is still valid, you can buy a Call option.
The same can be said when the market turns down. A signal for this occurs when the two curves of two Stochastic binary options indicators are in the overbought zone above eighty. Thus, each of the indicator curves intersect each other downwards.
You must wait until there is such a signal and wait for the close of the current candle.
If it happens and the signal is still relevant, you can buy a Put option.
As can be seen, the Stochastic strategy could be very profitable when it used for trading binary options but require technical knowledge and skills. It is perfect for more experienced traders.