How To Use Stochastics To Trigger Position Entry and Exit

Here’s one indicator setting I use to manually trade. See if it helps your manual trading. I use stochastics with the settings shown below.

The idea is, every time the daily candlestick closes at or above the upper level 95, I will open a sell position. When it closes at or below the lower level 5, I will open a buy position. It is of course not an absolute infallible technical strategy but even if you’re wrong, chances are great that the price will reverse back into your direction very soon because at the daily timeframe, a stochastic K Period of 5 means that the stochastics is showing data for the previous 5 days. So when it closes at 95 (or above if you want to be more conservative), the market is already stretched out and overbought and it most likely going to reverse because it has been in an uptrend for 5 straight days and the current closing price is a new high compared to the previous 5 days. The opposite is true for using the stochastic lower level of 5 to trigger opening a buy position. If you have the patience to stare at your computer monitor all day, you can enter/exit a position once the price reaches either the upper level 95 or the lower level 5 instead of waiting for it to close there. You’ll notice on the chart that there are periods when the stochastics reached but just almost closed either at 95/5 before reversal.

Example screenshot shows when stochastics has reached (not all instances but only those which prove my point) as referenced by the pink vertical lines.

If you’re the more aggressive type of trader and would rather martingale the sh*t out of your losing positions like John Wayne would, rather than cut your losses like a little baby, you can also use the same stochastics based strategy to signal when to double position and go out with guns blazing. Haha

Hope this helps you.

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This is a silly recommendation and is not profitable in the long term. Cutting your losses doesnt make you a baby. You should stick to facts. Where are your stats? How have you been trading this strategy? How much % do you risk per trade?

If you have a stop loss you might have a chance.

It’s called humor

I entered a live sell trade on EURJPY as the stochs has already reached 98, which also corresponded to a strong resistance level. Let’s see how this works. :sweat_smile:

Price is now starting to threaten the stochastic based resistance. Let’s see if it holds

A pretty reversal doji is starting to form right at the stochastic resistance level now at the 1hour timeframe. :money_mouth_face: It looks like it’s going to be a winner. :crossed_fingers:

It looks like the trade is going to go my way after all. :joy:

Oops! :thinking:

Since the trade did not go my way initially, I switched to a weekly timeframe to see where the possible resistance level and reversal would be, based on stochastics. I then waited until the price is just about there (was down -95 pips) before I double positioned my losing position. Now it’s almost break even. I am hoping it would now continue to reverse back down until my position is profitable. Using this strategy to manage your losing positions is not for the weak of hearts and not to be used when trading money you cannot afford to lose. :grimacing:

It’s just not a strategy mate. You hope it’s a winner and when it turns against you double your position. Whatever happened to cut your losers and let your winners run?

Majority of retail traders lose. Majority of them also use a stop loss. That’s a fact.

And if they didn’t - they would lose even bigger.

Or they could win back their loss or even profit if they timed it right. You talk as if it is a guarantee that double positioning on a losing position is a sure loss. It is not. It allows for your strategy to have another chance. I’ll tell you what a sure loss is… a stop loss. 100% guaranteed.

Here’s proof that using double position is not the doomsday scenario you portray. Look at my bot’s trade history. Over 10,200 trades in 1 month. Not a single position used a stop loss. Profitable by over +60%. Fully automated. Rumi Bot V1 System by thesufitrader | Myfxbook

If someone’s entry strategy is not good, I would not suggest using double position, if someone is using stochastics like I do, to signal entry, then they would most probably benefit from double positioning (granting that their equity can take the hit).

Jeez the drawdown is 42.33%!!! Lol you forgot to mention that when you said its over 60% profitability.

42% is not the average daily drawdown. Drawdowns are computed on a daily basis. It does not stick with you for life. It happened only once on the first day of running the bot. Regardless, after 10,619 trades of not using a stop loss, would you agree that using double position on a losing position is not as dire a strategy as you think? Would you know of any strategy that can survive 10,619 trades using a stop loss? Show me an actual example. Even if it is not yours.

You’ve also got a 25% drawdown. Any method that gives this kind if drawdown is not something I would ever look at. It doesnt matter what the strategy is… double down, triple down, stop loss. It doesnt matter. You wouldnt be able to sleep at night.

A total like 10,200 trades in a month is mind-boggling.

Do you use exit criteria apart from stop-losses or are all these trades still running if not stopped out? And if you get multiple entry signals on a given market does your system involve taking them all?

I’ve actually backtested my strategy as far back as January 2012 (the farthest back that CTrader backtesting would allow) and it is profitable. Never got wiped out even once. I’m also forward testing it for 1 month now with great success. The way my strategy works, drawdowns are not as significant a parameter because I diffuse it by trading specific pairs only, a shared margin, hedging, using stochastics to signal entry and double positioning and my “secret sauce”. So far, my bot seems to still work well.

It probably would not survive forever and get wiped out in the future, but the idea is to keep withdrawing money regularly, so you get your full equity back and then start taking in profits.

The bot does not use a stop loss but it does set a take profit. It opens multiple positions when all the entry signals are met. Although I have set a maximum number of simultaneous open positions per currency pair, it has never reached that ceiling because open positions are closed as new ones are opened.