We have yet another pattern here that you can implement when trading. Its important that you demo this trading pattern before actually going live. The opportunities aren’t massively common, however if used accurately this can help improve the way you trade. This pattern can be used along with other trading patterns like support and resistance, price action and swing trading.
The stochastic oscillator is a momentum based indicator that uses support and resistance to determine its position and was developed by Dr. George Lane in the last 50s. It refers to a point in the current price in relation to the price range over a period of time.
The pattern is simple and can be applied to a 5 minute, 15 minute or 30 minute time frame. For this example lets use a 5 minute chart. The first condition you are looking for is a candle breaking the UPPER or LOWER Bollinger Band (obviously a bullish candle for the upper and bearish candle for the lower). Once this condition has been met you must then draw your attention to the Stochastic Oscillator. There are two white dotted lines, the upper line is known as the 80 line and the lower is known as the 20 line. We are looking for the stochastics to have traveled above the 80 line for a bullish candle traveling outside the upper Bollinger Band, or below the 20 line for a bearish candle traveling outside the lower Bollinger Band. Once you have identified this you are going to wait for the next candle to form before you get into the trade. Once the next candle has formed the stochastics lines should have crossed and be heading back towards the white line. If the stochastic lines have not yet crossed or they are becoming further apart do not take the trade, wait until all of the conditions are met. If the conditions have been met, place a trade in the opposite direction of the previous candle for 5 minutes.
Stochastic Oscillator and Bollinger Band 5 Minute Trdading Pattern explained on YouTube
In this example below you can see all of the conditions of the trade were met and the call would have indeed won for a 5 minute trade.
Basic Trading Tips:
Avoid USD/JPY or JPY pairs.
Avoid trading during news events
Don’t chase losses, move onto another asset
Try trading commodities
I find SILVER during the asian session works quite well
Look for volatility when trading currencies
Do not trade against short term aggressive trends
I hope you find some of this information useful and either implement this pattern or the Stochastic Oscillator into your own trading pattern as further confirmation. You can leave a comment below if you are unsure of anything!