Stochastic 15Min System - Highly profitable

Its a system I have recently developed, inspired by Jake Bernstein's great book, The Complete Day Trader. I changed a bit the stop loss and exit rules to make the profits run a bit more.
I call it Stochastic OBOS, for Over-Bought-Over-Sold..
This is basically a trend following system, works well in trend phases. I sometimes filter the trades with Range Indicator to avoid ranging periods.

Pairs
Works best on GBPUSD\EURUSD\GBPJPY

Charts
I use this system on 15M\1H\4H. Of course, If there are conflicting signals the higher timeframe wins...

Indicators
*Stochastic Oscillator (K%=10, D%=3, Slowing=3), remove the signal line (slowing) as you won't be using it here.
*Awesome Oscillator

Entry Rules
Enter Long after Stochastic main line crosses 60 up.
Enter Short after Stochastic main line crosses 40 down.
Stop order is placed 1 pip above the high of the candle (for long), and 1 pip below the low of the candle (for short).

Exit Rules
Exit trade when Awesome Oscillator makes one bar in opposite direction of your trade. Explanation:
If you are long and Awesome Oscillator creates a red bar - exit trade when the bar is closed.
If you are short and Awesome Oscillator creates a green bar - exit when bar is closed.
Just look at the pictures.. it doesn't really matter to be 100% precise in these exits, anyway the trends you'll catch are big enough so late exits won't hurt the profits too much.

Money Management
As usual I recommend not risking more than 2% of equity on a single trade.

Visit my blog for more Free Trading Systems and Indicators!

interesting. I used to rely on stochs but had no sucess as they lag. I will demo and see how this one gets on

well pretty quick to figure out this system doesn't work !

the usual...the Oscillator is lagging, go long on Oil 15mins and was up 55 pips but Awesome not changed colout yet, by the time it changes colour you're down 100 pips.....

exits are the problem with these type of systems, hold too long and WHAM you're in drawdown

advfntrader:
First of all, the system works. I didn't recommend trading OIL with it, but I know it works there too.
If you are looking for a system whose trades never fail, it is going to be a long, long search.
This attitude is one which prevents many people from becoming great traders.

Thanks for sharing this system

advfntrader said:

well pretty quick to figure out this system doesn't work !

the usual...the Oscillator is lagging, go long on Oil 15mins and was up 55 pips but Awesome not changed colout yet, by the time it changes colour you're down 100 pips.....

exits are the problem with these type of systems, hold too long and WHAM you're in drawdown

Click to expand...

Hi Advfntrader

Perhaps you may have been a little hasty in judging this system as "... doesn't work!"

In fact Miki256 clearly stated that there are certain conditions under which it works best, such as using:

GBPUSD
EURUSD
GBPJPY


Further, he does give qualifying conditions under which trades can be selected and managed ... such as:

15M
1H
4H. If there are conflicting signals the higher timeframe wins...

Stop order is placed 1 pip above the high of the candle (for long), and 1 pip below the low of the candle (for short)

And you may care to have a second glance at the EXIT RULES which amply cover various scenarios. It is not fair for you to declare broadly that exits are the problem with these type of systems, hold too long and WHAM you're in drawdown

The same could be said for many systems, but Miki256 has clearly tested and tried this method and presents it for trial THEN critique, not a stereotyped response from a Senior Member of this forum.

I would expect more from those on the forum who should be more courteous and nurturing towards new members who are having a go to present something simple and useful.

You were taught manners - perhaps you could use some. It would have been more credible of you to have actually trialled the system on one of the pairs recommended, using the rules as recommended, and then come to the forum armed with something constructive and complementary.

Rubber stamp put downs are rather ordinary and common.

Well done Miki256 - I look forward to more of your examples - perhaps you would care to post some live trades we could follow?

Ingot54 Thanks for support. I just want to emphasize - critique is good and welcome. I really like this system and want to improve it, AND ANY HELP IS ENCOURAGED. But prejudice is good for no-one.

About live trades:
It is a great idea.
I will post live trades when I am more free - nowadays I am working primarily on automating my systems and perfecting them.

Cheers!

I would like other more experienced traders to back me up here....

please listen to me when I say that using lagging indicators is NOT the answer. I have tried numerous systems like this and I personally have found they offer little more than 50/50. by all means waste the next few years of your life testing and I am sure you will find out the same thing.....

I'm sorry if you think I am not being supportive, I'm just telling you the truth that you don't want to hear.

its about running winners and cutting losers. if you can do that you will be OK

ps. please see another example of failing trade on currencies....

Ingot54 said:

Hi Advfntrader

Perhaps you may have been a little hasty in judging this system as "... doesn't work!"

In fact Miki256 clearly stated that there are certain conditions under which it works best, such as using:

GBPUSD
EURUSD
GBPJPY


Further, he does give qualifying conditions under which trades can be selected and managed ... such as:

15M
1H
4H. If there are conflicting signals the higher timeframe wins...

Stop order is placed 1 pip above the high of the candle (for long), and 1 pip below the low of the candle (for short)

And you may care to have a second glance at the EXIT RULES which amply cover various scenarios. It is not fair for you to declare broadly that exits are the problem with these type of systems, hold too long and WHAM you're in drawdown

The same could be said for many systems, but Miki256 has clearly tested and tried this method and presents it for trial THEN critique, not a stereotyped response from a Senior Member of this forum.

I would expect more from those on the forum who should be more courteous and nurturing towards new members who are having a go to present something simple and useful.

You were taught manners - perhaps you could use some. It would have been more credible of you to have actually trialled the system on one of the pairs recommended, using the rules as recommended, and then come to the forum armed with something constructive and complementary.

Rubber stamp put downs are rather ordinary and common.

Well done Miki256 - I look forward to more of your examples - perhaps you would care to post some live trades we could follow?

Click to expand...

advnftrader:
I know what you are talking about. I have tried many indicator-based systems, and experienced many systems.... I agree that chart-based systems generally perform better.

BUT...
That strategy was written in a book 20 yrs ago, and it still functions, so - its good enough to me.

And regarding the failed trade. I can show you a failed trade for ANY system you'll post. ANY.
You want to really KNOW how a system performs? Take bigger samples. Once you have checked 100 trades, you can reach a WORTHY conclusion. Until that point, its just luck.

I don't wanna argue with you ...... if you are making money using Stochastics .... thats more than fine by me. Personally I don't think I can make any money with this system .... but it is not just plain pessimism ... I have theoretical reason to defy such indications. Forex is a dynamic market, price is always moving and changing from one phase to another ..... while the levels you are telling us to look for being crossed are Static ..... so how can people measure a dynamic ever-liquidating entity with a static level is beyond me. For example, sometime trend gathers ... starts and readies to be going .... but it has got no steam .... with enough rallies and declines .... it manages to scrounge up enough steam to get to its logical target ..... in this meantime, Stochastics can cross same levels over and over again. This indicator does not run with the price speed. It can get over-bought (?) in 50 or so pips sometimes and it can also remain over-bought and still manage to move 100+ pips in the direction of the trend. And I do wonder if there is anything like being Over-bought and over-sold in the forex market ? I mean what merchandise are we talking about, which is over-bought ..... or over-sold ??? A million dollar question IMHO!

the system needs a trail stop and problem solved. If you see a trade turning around before the rules say exit, then what should your experience tell you?! exit the damn trade with a profit and wait for the next signal! simple solution! yes, indicators aren't that great but the system is alright with a trail stop on it of maybe 30-50 pips

Thanks for sharing...This indeed does work.

as with any system, the higher the time frame, the more stable the moves are. so this in a H1 or H4 works really good. as with any method like this one, it just gets more range bound/choppy below the 1 hr time frame hence the false signals and need for a range filter for the M15

Miki256 said:

so - its good enough to me.

Click to expand...

apart from the bits you admitting to changing !?!

after all, what does that Bernstein bloke know anyway huh ?

advfntrader said:

I would like other more experienced traders to back me up here....

please listen to me when I say that using lagging indicators is NOT the answer. I have tried numerous systems like this and I personally have found they offer little more than 50/50. by all means waste the next few years of your life testing and I am sure you will find out the same thing.....

I'm sorry if you think I am not being supportive, I'm just telling you the truth that you don't want to hear.

its about running winners and cutting losers. if you can do that you will be OK

ps. please see another example of failing trade on currencies....

Click to expand...

back up, as requested

seriously Miki, most "professionals" would use Stochastics in exactly the opposite fashion to you !
research "Stochastic Pop".
Then go back to your first charts, and advfn's chart, and try to tell me that the Stochs crossing into the "overbought" area each time don't prelude a further continuation upwards of price

advfntrader said:

I would like other more experienced traders to back me up here....

please listen to me when I say that using lagging indicators is NOT the answer. I have tried numerous systems like this and I personally have found they offer little more than 50/50. by all means waste the next few years of your life testing and I am sure you will find out the same thing.....

I'm sorry if you think I am not being supportive, I'm just telling you the truth that you don't want to hear.

its about running winners and cutting losers. if you can do that you will be OK

ps. please see another example of failing trade on currencies....

Click to expand...

I agree that indicators lag and are almost pointless - Afterall they are just a representation of price, once you realise that the indicators are made from price numbers and not the other way, you'll probs scrap indicators and figure out what they were actually saying....

Thats not to say money can't be used with indicators... Its just an indicator that tells you oversold or overbought, when you understand what that means on the chart, you won't need it anymore.

Anyway, ADVFN i think the reason you're failing with this strategy is because it is for trending market condition, which makes sense, means your only buying on the pullbacks... But he doesn't specify how to identify the trend...

So how about this; When 50EMA is sloping upwards and stochastics goes oversold, buy when its coming out of the zone and not retraced past, 0.618% fibonacci... That'll work for sure.

The method works. that setting on stochastic is a good one. never even heard of it used like that either. makes for some big moves if done right. i tried it. just need a stop of like 50-55 pips. and get rid of the AO for exits. you don't need it. use a trail stop of 35-40. Also, the buy or sell stop should be placed maybe 10 pips instead of 1 pip. just some things i saw.