Step Stochastic Crossover Trading Strategy for MT5

Step Stochastic Crossover Trading Strategy for MT5

Many trading strategies trade trends and momentum reversals. An example of this is when traders trade in the direction of the reversal, regardless of what the long-term trend direction is.

This trading strategy tries to make fewer low-probability, low-yield trades. It uses trade signals based on the trend from the mid-term and long-term. It also uses an indicator that is not as well known by other traders but is very effective in identifying trend and momentum reversals.

Step Stochastic Indicator

The Step Stochastic Indicator is a technical indicator that shows the momentum of the market. It plots an oscillator line that is based on the Stochastic Oscillator. The lines oscillate between 0 and 100. However, unlike the traditional Stochastic Oscillator, the Step Stochastic Indicator plots a line that doesn’t oscillate smoothly. Instead, it plots a line that oscillates in steps, which is why it’s called the “Step” Stochastic.

The Step Stochastic Indicator is usually based on the Average True Range (ATR) to identify the high and low points of a range, which is then applied to the Step Stochastics Indicator. However, this can often cause the Step Stochastic lines to spike whenever there are big market changes.

This version of the Step Stochastic uses a set of price bars to minimise these fluctuations. This creates a more relevant indication of momentum direction based on the oscillations.

This indicator plots two lines on a graph, and the direction of momentum changes depending on where the lines cross. The step stochastic line is always above or below the signal line, depending on whether momentum is bullish or bearish. The area between the two lines is filled in different colors to help traders see when momentum is changing. Blue means that momentum is bullish, and red violet means that momentum is bearish.

This indicator has five different settings that traders can use to change its sensitivity. “Price to use in calculations” means the price point on the candle that the indicator will use for its calculations. This is set to the Median price. “ATR calculation period” means how many bars the indicator will look back for its underlying ATR calculation. “K slow” and “K fast” variables are used to calculate the indicator’s underlying stochastics. “ATR minimum maximum window size” is the number of bars that the indicator uses for its ATR window.

When all of these settings are combined, they produce a very accurate signal that can be used to trade in any market.

200 Simple Moving Average

The 200 SMA line can be found on the MT5 platform by using the “Moving Average” indicator. The Period variable should be set to 200 and Method should be set to Simple.

The 200 Simple Moving Average (SMA) is a common type of moving average that is used to indicate the long-term trend of something, like a price on a graph. When the price is above the 200 SMA line, it is said to be in a bullish trend, and when it is below, it is in a bearish trend.

Traders would usually avoid trading against the long-term trend as shown by the 200 SMA line. This is because price often bounces off this line, causing trades to have shorter price swings. Trades taken in the direction of the long-term trend often have the potential to produce higher profits.

Trading Strategy Concept

The idea behind this trading strategy is to use the Step Stochastic Indicator lines crossover as a signal that the momentum has changed. But we will only trade when there is a reversal signal and it is also confirmed by the long-term trend, as shown by the 200 SMA line. This should give us better odds of winning and make our profits bigger, which will lead to better risk-to-reward ratios.

Buy Trade Setup

The Step Stochastic Crossover Trading Strategy for MT5 is a trading system that uses the step stochastic oscillator to determine when to enter and exit trades. The strategy buy trades when the price is above the 200 day moving average line and the 200 day moving average line slopes up. The price should also retrace near the 200 day moving average line. The strategysells trades when the price is below the 200 day moving average line and the 200 day moving average line slopes down. The price should also retrace near the 200 day moving average line.

To enter a buy trade, the Step Stochastic Line must cross above the Step Stochastic Signal Line and the color between the two lines changes to sky blue. To enter a sell trade, the Step Stochastic Line must cross below the Step Stochastic Signal Line and the color between the two lines changes to pale red violet.

The stop loss for buy trades should be placed below the entry candle on the support level. The stop loss for sell trades should be placed above the entry candle on the resistance level.

The Step Stochastic Crossover Trading Strategy for MT5 can be used on any time frame from the 1 minute chart up to the monthly chart. The strategy can be used on all currency pairs.

Sell Trade Setup

The Step Stochastic Crossover Trading Strategy for MT5 is a sell-only strategy that looks for bearish conditions below the 200 SMA line, with the slope of the 200 SMA line pointing downwards. The price should also retrace near the 200 SMA line before entering a sell order.

Open a sell order as soon as the Step Stochastic Line crosses below the Step Stochastic Signal Line and the filling between the two lines changes to pale red violet.

To set a stop loss, place it above the entry candle on the resistance line.

When you want to exit the trade, close it as soon as the Step Stochastic Line crosses above the Step Stochastic Signal Line and the filling between the two lines changes to sky blue.

This strategy can be used on any timeframe, but we recommend using it on the 4-hour or daily timeframe for best results.

Conclusion

The Step Stochastic Indicator is a good indicator to use to see trends or momentum over the long term. That’s why it works better when you use it with the 200 SMA line. It can sometimes be less accurate when there are big market spikes happening, because those spikes can distort the range of the “step characteristic” of the two lines. However, this indicator has fixed that problem.

It’s not perfect, but it usually leads to trades with high chances of winning, and also has the potential to make a lot of money on each trade.

Related Posts