Stochastic Trend Momentum trading system is based on the classic strategy of Stochastic oscillator, Envelopes, and two 21 & 50 period Simple Moving Averages (SMAs).
Stochastic Trend Momentum trading rules
First, make sure to trade in the direction of a trend. You can define the trend based on a higher timeframe by analysing the two SMAs.
If 21 MA is trending above 50 average and both are sloping to the upside, then the trend is bullish. Vice-versa for bearish trend.
How to trade with Stochastic Trend Momentum system
This Forex trading system should be used on H1 timeframe and higher. Therefore, the system is for intraday and swing trading. It can be used on any G10 pair or main commodities.
Conditions to buy
In order to long an instrument, Stochastic should be crossing or touching an oversold 20 area and sloping to the upside. While both SMA should be indicating bullish trend with price preferably trading above 21 SMA.
In addition, the slope of Stochastic Envelopes could be used to confirm trend direction.
Conditions to sell
In order to short an instrument, exact opposite conditions should be met.
Conditions to close
Stochastic Trend Momentum trading system has no fixed take profit rules. You can use nearby support/resistance levels, crosses of 21 & 50 SMA, or any of your preferred and tested methods.
Meanwhile, stop loss should be determined based on price developments. SL level could either be nearby support/resistance point or just above 50 SMA.
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