The Slow Stochastic Trading Strategy
The Stochastic oscillator and the Parabolic system are a good combination for effective binary options market analysis. In this article, we will look at a strategy based on these two tools. However, we aren’t going to use the classic versions of these indicators, instead we’ll use custom modifications. These solutions are considered effective by a large number of online traders and these developments are at the top of the rankings in the TradingView catalog.
Overview of the indicators and the strategy
The system uses a standard combination of non-standard tools:
- The Slow Stochastic oscillator and custom Parabolic SAR are selected. The formula is somewhat modified in comparison to the classic version. And the appearance is also different. Now the indicator’s signal points better reflect what is happening on the market. A standard color display has been added: red – price reduction, downward trend, and green – quote growth, upward price trend.
- The Slow Stochastic is a very popular variation of the oscillator. It differs in its slowness, but this doesn’t mean that it has become slower to respond to price fluctuations. On the contrary, its reaction rate has increased. In fact, the slowness is manifested in the way the lines are built. It is also characterized by a high degree of smoothing, and as a result, it better reflects the balance of power on the market. Otherwise, the Slow Stochastic is not much different from the classic version. It also shows the balance of power and overbought/oversold markets.
Setting up the terminal
This strategy is considered a professional system, therefore special software is required. Modern online services have saved traders from having to install all kinds of programs – the necessary services are available in any browser. In our case, we need the live chart from TradingView and any trading terminal. One of the best companies is Binomo, so if you have not yet decided on a trading platform, then we definitely recommend turning your attention to Binomo (site). This is the best choice for novice traders, and others as well.
Step-by-step instructions on how to configure the terminal and the site for analysis:
- In two different browser tabs, we open the trading terminal and the live chart. In both windows, choose the same currency pair – any of the available options that offer the greatest profit. We also choose the candlestick chart with a time frame of 1 minute.
- On the technical analysis platform, we add the two indicators – «CM_Parabolic SAR» and«Slow Stochastic». Enter the name without quotes in the search bar and set those options from the list on the chart.
- Set the period for the Stochastic’s slow line to 14, and 3 for the fast line.
- In the trading terminal, we pre-set the investment for the trade. The expiration (5 minutes) must be set immediately before opening the transaction.
You should choose a currency pair in the trading terminal. The assets built into the trading platform are not suitable for trading on this strategy. For example, that would be the Binomo crypto index (CRYPTO IDX). This is a very good asset for trading, but it is only suitable for strategies that use the indicators built into the terminal. In our case, suitable assets would be currency pairs, EUR/USD, AUD/USD, and others officially listed on financial exchanges.
Trading signals on the strategy
The Parabolic system attracts many traders with its simplicity. According to the indicator signals, the market is always in a phase – it is either growing or falling. At least that’s what the Parabolic SAR says. In fact, this is not quite true of course. Especially if you look at the chart under different scaling periods. That’s why it’s good to combine this instrument with other indicators that have a neutral phase and no trading signals. In our case, we assign this role to the Slow Stochastic. The principle of market analysis for this strategy is to monitor duplicate signals from the two indicators.
- A signal for a decrease – the red points of the Parabolic SAR move to a position above the price bars. The curves of the Slow Stochastic should intersect at the top of the window and break through the dotted curve at level 80.
- A signal for an increase – the green points of the Parabolic move to a position below the price bars, and the lines of the Stochastic Oscillator exit the oversold zone (below 20).
Given the possible redrawing of values, entry into the market should be carried out only at the moment the signal candle is already closed. The best point to open a trade is the last 3-5 seconds before the bar closes. On the TradingView chart, the remaining number of seconds before the close of the candle is indicated next to the quotes on the horizontal scale.