The stochastic oscillator can probably be called the most popular indicator. There are no strategies based on it: both classical, where the stochastic is a confirmatory oscillator, and strategies based on modified versions of the instrument, and tactics, where the stochastic is the main indicator, but where there are several of them.

We will look at the third option in more detail, focusing on the SpudStochastic indicator. The strategy is called “Ropes from Stochastics” and there is a lot of information about it on the Internet. Our strategy is special in that there is one more auxiliary combined indicator, Cycle Koufer Extremus.

SpudStochastic – dial gauge for determining trend reversal

SpudStochastic is an arrow indicator that uses the principle of Spud threads. It combines 8 simple stochastic oscillators with different settings. A signal to the input is the interlacing of all stochastics (threads) into one rope. That is, when all the lines of the oscillators converge visually at one point (not necessarily the point, but the similarity should be seen) and merge together, the top of the rope will be formed. As soon as the entire rope turns, you can open a deal. Important point: the top of the rope should be in the overbought or oversold zone. If the threads intersect at level 50 (conditionally) and diverge, forming a cobweb, there is no signal.

Spud’s theory of stochastic threads appeared in 2007. It provides for the use of up to 18 oscillators depending on timeframes (recommended – 1H and 4H). The period of% D remains unchanged,% K varies from 6 to 24. Oscillator lines have two colors that divide the filaments into small-period and large-period. It is difficult to wait for the ideal rope, because it is believed that it should be extremely thin, the lines should be pressed as tightly as possible, there should be no voids and random motion.

  • Important! If the rope is formed long before the summit, this indicates a strong trend. Even if SpudStochastic enters the overbought or oversold zone, then it’s better to not rush to open a deal.

Less is known about the Cycle Koufer Extremus indicator. This is a tool that allows you to track the end of trend waves.

Trading Terms:

  • Timeframe – M30.
  • Currency pairs – any of the number of liquid.

SpudStochastic settings: AlertOn = false (sound on / off), DrawARROW = false (arrows on / off), LevelUP = 85, LevelDn = 15 (oscillator levels, overbought or oversold areas).

Parameters of each stochastic (% K,% D, deceleration):

  • 6, 3, 3;
  • 9, 3, 3;
  • 12, 3, 3;
  • 14, 3, 3;
  • 16, 3, 3;
  • 19, 3, 3;
  • 21, 3, 3;
  • 24, 3, 3.

Cycle Koufer Extremus settings: FastMA = 12, SlowMA = 24 (fast and slow moving values), Crosses = 50 (intersection).

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The condition for opening a purchase transaction:

  • SpudStochastic lines formed a rope. The distance between the lines is minimal.
  • Most oscillators are above level 15.
  • Cycle Koufer Extremus showed a red dot on the chart near the zero level.

At the next candle you can open a deal, provided that most oscillators have left the level 15 zone. Stop-loss – 20-40 points. We close the deal as soon as most SpudStochastic oscillators are at level 85.

The condition for opening a sale transaction:

  • SpudStochastic lines formed a rope. The distance between the lines is minimal.
  • Most oscillators are below level 85.
  • Cycle Koufer Extremus showed a red dot on the chart near the one hundredth level.

At the next candle you can open a deal, provided that most of the oscillators have left the zone of the 85th level. Stop-loss – 20-40 points. We close the deal as soon as most of the SpudStochastic oscillators are level 15.

There are losing trades on this strategy, since stochastics can turn in the neutral zone. But it is enough to catch a strong trend and one profitable deal will pay back some unprofitable ones. Since the frequency of signals for opening a position is low, it is better to work with several currency pairs at the same time. We test the strategy on a demo account and leave comments!

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