The best way to find a market entry with the Stochastics indicator is looking for long entries after a temporary bearish retracement during an uptrend and a short entry after a bullish retracement during a downtrend.
It may sound too complicated at first. Especially, if you are new to technical analysis and have little experience with trading divergences. But let’s take a look at an example and you will realize it is a rather straightforward concept to grasp.
- Download “TraderVersity-StochasticAutoTrendline” (Zip/RAR File).
- Copy mq4 and ex4 files to your Metatrader Directory …/experts/indicators/
- Copy the “TraderVersity-StochasticAutoTrendline.tpl” file (template) to your Metatrader Directory …/templates /
- Start or restart your Metatrader Client.
- Select Chart and Timeframe where you want to test your forex system.
- Right-click on your trading chart and hover on “Template”.
- Move right to select “TraderVersity-StochasticAutoTrendline” trading system and strategy.
- You will see “TraderVersity-StochasticAutoTrendline” is available on your Chart.
- 1st. Auto Trend Lines indicator: Up Trend.
- 2nd. The price makes higher bottoms on the chart, while your RSI indicator is giving you lower bottoms.
- 1st. Auto Trend Lines indicator: Down Trend.
- 2nd. The price makes lower tops on the chart, while your RSI indicator is giving you higher tops.
Divergence Signals do not provide clear Profit Targets. We do not know how far prices are likely to go once they reverse, so in many cases, we have to utilize other techniques to exit our divergence trade setups.