The Stochastic Cross Alert MT4 Indicator is a trading strategy for the forex market which uses the cross of the fast and slow Stochastics lines to produce a trading signal. For this strategy, we will have to make several modifications to get what we want out of the strategy setup. First, we will only consider Stochastics crosses that occur in oversold and overbought regions, and we will use these to reference the signal arrows when they are combined with the Fibonacci retracement numbers. And easier way to profit from Forex consistently is to use an automated trading solution.
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Stochastic Cross Alert MT4 Indicator – Trading Rules
The position of the crossover in the natural Stochastics oscillator is a key component of this strategy. We consider areas where the cross occurs at oversold and overbought regions, and then consider the arrows shown by the Stochastic Cross Alert MT4 Indicator. We shall then round off by using the Fibonacci retracement numbers to confirm the arrow signals provided by the Stochastics Crossover indicator.
Stochastic Cross Alert MT4 Indicator – Long Trade Entry Rules
The first step is to make a trace from the swing low to the swing high on the chart with the Fibonacci retracement tool, and then open the Stochastics oscillator found in the MT4 Indicator suite by clicking Insert -> Indicators -> Oscillators -> Stochastics. Set the indicator to 10,3,3. The long trade entry signal occurs when the following is seen on the charts:
- Price has retraced and is bouncing off a Fibonacci level when the Stochastics lines have crossed at an oversold level (i.e. <20).
- A green arrow appears under a candle at this area and points upwards. The candle here is the signal candle.
- The next candle is the entry candle. The entry should be made when price pulls back on the Fibonacci retracement line where the signal was derived.
Stochastic Cross Alert MT4 Indicator – Buy Signal
In this chart, three areas where long trades can be setup are shown. The first was a successful setup which earned 96 pips for 38 pips risked, which is a risk-reward ratio of 1:2.5. The second setup was a failure and the stop loss would have been triggered for a loss of between 20 to 25 pips. The third was a successful setup as well.
Stop Loss and Take Profit Settings
The Fibonacci retracement signal line which is also the entry line provides a sound basis for setting a stop loss a few pips below this line as it is expected to hold out as a strong support. However, the trader must ensure that the stop loss is below the lowest price of the previous 5 candles.
The Take Profit point will naturally be at the next key area of resistance, which in this case is the next Fibonacci retracement line above the entry point. Once the price action has crossed the midway point between the entry Fibo retracement line and the exit line above, a trailing stop can be applied to protect the trade.
Stochastic Cross Alert MT4 Indicator – Short Trade Entry Rules:
The first step is to make a trace from the swing high to the swing low on the chart with the Fibonacci retracement tool, and then open the Stochastics oscillator found in the MT4 Indicator suite by clicking Insert -> Indicators -> Oscillators -> Stochastics. Set the indicator to 10,3,3. The long trade entry signal occurs when the following is seen on the charts:
- Price has undergone upside retracement and is rejected a Fibonacci level when the Stochastics lines have crossed at an overbought level (i.e. >80).
- A red arrow appears under a candle at this area and points downwards. The candle here is the signal candle.
- The next candle is the entry candle. The short entry should be made when price pulls up to the Fibonacci retracement line where the signal was derived.
Stochastic Cross Alert MT4 Indicator – Sell Signal
In this chart, two areas where short trades can be setup are shown. This trade was taken from an H4 chart.
Stop Loss and Take Profit Settings
The Fibonacci retracement signal line which is also the entry line provides a sound basis for setting a stop loss. Set the SL to a few pips above this line as it is expected to hold out as a strong resistance. However, the trader must ensure that the stop loss is above the highest price of the previous 5 candles.
The Take Profit point will naturally be at the next key area of support, which in this case is the next Fibonacci retracement line below the entry point. Once the price action has crossed the midway point between the entry Fibo retracement line and the exit line below, a trailing stop can be applied to protect the trade.
Precaution when Trading with the Stochastic Cross Alert MT4 Indicator
As can be seen from the second setup on the long trade example, the trade can actually fail. However, the trader can still make profits by applying the trade protection principles in setting the stop loss and take profit targets. In the example, the first trade would have netted 96 pips and the 2nd would have incurred a 20-pip loss. The trader would still walk away with 76 pips. Of course the third trade was a success and this would have eliminated the loss of the 2nd trade.
Typically, the minimum that a trader should aim for is to make 2 pips for every pip risked as the stop loss. A risk-reward ratio of 1:2 or 1:3 will ensure that every successful trade can only be cancelled out by two or three losing trades of equal measure.
Time Frames
Technically speaking, you can use this indicator for all time frames. However, the shorter the time frame, you will see more fluctuation and possibly more whipsaw which may cause small losses that can eat up your portfolio quickly. We recommend that you use higher time frames like the 4H for better consistency.
Trading with Stochastics and RSI Video Tutorial
Trading with Stochastic and RSI Video Tutorial
Stochastic Cross Alert MT4 Indicator Download
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