In this article we will present a trading system with stochastic oscillator that can be used to trade in any market and in any time frame (although it is preferable that the system is not used in time frames less than 15 minutes), which is based on the MACD, CCI and stochastic oscillator technical indicators. It is a technical trading strategy that provides clear buy and sell signals, as well as exit and take profit signals.

Because it is a system based purely on technical analysis, we do not recommend the trader to operate with this system in the periods in which economic news or important market indicators are published, since the trading signals of technical systems like this tend to fail.

As always, it is recommended to test this methodology with a demo account before using it to trade with real money.

System setting and indicators

  • Recommended markets: This trading system can be used in any market, including Forex, precious metals and indices.
  • Recommended time frame: The recommended time frames for this system are 15 minutes, 30 minutes, 1 hour, 4 hours and daily.
  • Technical indicators:
    • 1 CCI (Commodity Channel Index) with standard configuration (14)
    • 1 stochastic oscillator with standard configuration (14,3,3)
    • 1 MACD with the following configuration: (8, 40, 8)

The entry signals are provided by the three indicators simultaneously, while the exit signal is provided by the CCI, as we will see later.

System rules

The setups in this trading system with stochastic oscillator for opening new positions are the following:

Long positions

The opening of a long position will be made when the following conditions are met:

  • The CCI indicator must be equal to or greater than 0.
  • The stochastic oscillator must be equal to or greater than 50.
  • The MACD oscillator must be equal to or greater than 0.

Short positions

The opening of a short position will be made when the following conditions are met:

  • The CCI indicator must be equal to or less than 0.
  • The stochastic oscillator must be equal to or less than 50.
  • The MACD oscillator must be equal to or less than 0.

Closing positions

For closing of open positions the following options can be used by the trader:

  • All open positions must be closed when the CCI crosses the zero line in the opposite direction to the position.
  • A fixed profit objective can be used depending on the time frame and the market in which we are trading. For example, in the case of EUR/USD, we can use the following profit objectives:
    • M15: 10 pips
    • M30: 25 pips
    • H1: 40 pips
    • H4: 60-100 pips

Trading system with stochastic oscillator examples

Trading system with stochastic oscillator

30-minute chart of the EUR/USD pair with trading signals generated by this trading system. MT4 platform of the broker ThinkMarkets

In the previous image we see an M30 chart with several buy and sell trading signals generated with this trading system. In this example, most of the trading signals were winners trades, but as with any system, there were also losing signals. In the buy signals, the stochastic oscillator was above 50, while the CCI was above zero, as in the MACD. In the sell signals, the stochastic oscillator was below 50, while the CCI was below zero, as in the MACD.

The most reliable buy and sell signals in this trading system with stochastic oscillator are those in which none of the indicators are in an overbought and oversold condition.