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Stochastic and 3 iMA

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Stochastic and 3 iMA

Understanding Stochastic Indicators 🎒

  • Developed by George Lane in the 1950s, the Stochastic Oscillator measures momentum by comparing a particular closing price of a security to a range of its prices over a specific period.
  • It helps to identify overbought or oversold conditions in the market, typically using two lines: %K (the main line) and %D (the signal line).
  • Stochastic values range between 0 and 100, with values above 80 often indicating overbought conditions and values below 20 indicating oversold conditions.

The Three Moving Averages (3 iMA) Strategy πŸ“ˆ

  • The 3 iMA strategy employs three different moving averages to smooth price data and identify trends more reliably.
  • This method reduces false signals often encountered in single moving average strategies.
  • The three moving averages can be set with different time periods to capture short, medium, and long-term trends effectively.

How Stochastic and 3 iMA Work Together

  • By combining Stochastic indicators with the 3 iMA strategy, traders can make more informed decisions by confirming signals from both methods.
  • For instance, a buy signal may emerge when the %K line of the Stochastic crosses above the %D line while the short-term moving average is above the long-term moving average.
  • This synergy can increase the probability of successful trades by leveraging both momentum and trend-following aspects of the market.

Signals Generated by Stochastic and 3 iMA

  • Buy Signals:
    • Occurs when %K crosses above %D and confirms the trend with the moving averages.
    • If the fast iMA is above the medium and slow iMA, it can signify a strong bullish trend.
  • Sell Signals:
    • Occurs when %K crosses below %D while also corroborated by the moving averages positioning.
    • If the fast iMA is below both the medium and slow iMA, it indicates a strong bearish trend.

The 'Stochastic and 3 iMA' trading system promises much while enticing traders with a simple and straightforward approach. Unfortunately, sometimes simplicity may lead to oversights. With a rating of 3.43, it seems to have garnered a decent following, yet ongoing critiques must b ...

Release Date: 24/02/2017