Dynamic Dual Stochastic: Surfing the Intraday Charts with an Agile Trading Strategy

The Stochastic indicator has long been a popular tool for finding and executing various trade setups. Most commonly, traders use Stochastic to determine overbought and oversold conditions in the market.

However, today we will show you a trading strategy that uses Stochastic rather atypically. As you may be able to guess from the title, we are using two Stochastic oscillators for this strategy. One is a fast Stochastic, and the other is a slow Stochastic.

The result? A robust trading strategy to use on your intraday charts up to the 1H timeframe. It can be used as a swing strategy, given that some trades can be held for more than a day. However, most trades will be of a shorter-term duration.

The goal is to use the slow Stochastic to pick potential trades and the fast Stochastic for trigger signals of those trade setups.

Settings for the dual Stochastic:

    * Slow Stochastic – 34, 21, 89

    * Fast Stochastic – 5,3,3

We add the RSI under the two Stochastic oscillators as an additional filter layer. The purpose of the RSI is to provide additional confirmation of the trend momentum. Thus, we look for the RSI to be above 50 in bullish setups and below 50 in bearish setups.

    * RSI settings: 89 period

Rules for the strategy:

    3. As you can see in the chart above, the slow Stochastic (34, 21, 89) is our scanner for trade opportunities. It defines the first condition of this strategy. The Slow Stochastic can be bullish or bearish at any given moment. Next, we look for a signal in the same direction on the Fast Stochastic (see below).

    6. The RSI should then be aligned with the Slow Stochastic. In bullish setups, the RSI needs to be above 50. In bearish setups, we look for an RSI reading below 50.

    9. Look for the classic bullish or bearish signal on the Fast Stochastic. That is a bullish crossover from the oversold area or a bearish crossover from inside the overbought territory.

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