30 Minute Stochastic Strategy for Trend Followers
In the financial trading markets, the best thing you can do is follow the trends; this can lead to substantial profits if you are careful. However, for following trend signals and preventing false breakouts, several oscillators are required to help out traders in indicating market trends. Among the commonly used oscillators in the market, Stochastic is one of the most favorite of traders, especially as it can provide them with multiple trend following signals. Most of these signals can be used for trading binary options, but the 30-minutes charts are the most preferred in this trading market.
First and foremost, you need to understand what stochastic really is. It is basically a unique indicator where the short term movements of assets are unpredictable and random. However, these random movements can be plotted over time so that they indicate a general direction in which the trend is moving. The strategy is based on the fact that no matter how strong short-term movements are, they cannot dissipate the trend from leading the way.
In stochastic charts, there are two basic lines: the short term %K line and the long term %D line. The simplest to understand is the basic stochastic signal that usually occurs when the %D line within a trend is crossed over by the %K line. If there is currently an upward trend, a buy signal is indicated when the %K line goes below %D line and then rises back. For a downtrend, the exact opposite is true. Although it is a good basic Stochastic signal, it is not the strongest one you can get.
Alternatively, you can look out for a much stronger stochastic signal that can be achieved using different techniques and trend lines and occurs sometimes after the basic signal. It is not uncommon for you to miss the very first signal given by stochastic. Moreover, waiting for the second signal even when you do spot the first one is still considered better because of the weakness of the first and the strength of the second signal. After the strong signal, you should start looking for the continual signal, which usually occurs in the form of a ripple or a dip.
Once after the continuation signal has been received and both the %K and %D lines are moving in the similar direction, rest assured that the signal is strong. Now it can be difficult to spot the stochastic signal, but if you successfully do, it can be a strong indicator of market trends and that too in a fairly accurate manner.