This trading method is a method that was invented by Jake Bernstein in his book The Complete Daytrader. This approach is based on two of the last trading methods: Buy signal is generated when the Stochastic crosses the overbought level from below, and a Short signal is generated when the Stochastic crosses oversold level from above. Trades are closed when the main line crosses the signal line in direction opposite to our trade. This is a trading system that looks contrary to the overbought-oversold concept, but it also functions well in trending markets.
here’s how it works.
* Use the 14 period slow stochastic with 5 bar smoothing for %K. Use %D 12
* When SI goes above 75% level then BUY
* Exit when %K and %D cross
* When SI goes below the 25% level, then SELL
* Exit when %K and %D cross
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