Stochastic Fly trading strategy

Stochastic Fly trading strategy is one of the most common and used by traders when trading in the foreign exchange market. The advantages of this trading strategy are its ease of use and high profitability. And the originality of this strategies is that its authors managed to combine seemingly incompatible things - to combine the signals given by the oscillator и trend-tracking indicator. There are not many strategies that managed to "make" the oscillator signals work when trading on the trend.

Marketplace: ;
IndicatorsEMA, Stochastic, fractals;
Timeframe: H1;
Strategy: intraday;
Protective orders: StopLoss.

In describing Stochastic Fly trading strategy In this article we will use the trading terminal MetaTrader4.

Tools used in the trading strategy

When trading by Stochastic Fly strategies The following tools are used: moving average, Stohastic oscillator and Williams' fractals. On the chart is superimposed EMA moving average with period 100, built on closing prices, as well as Stohastic oscillator with the following parameters: period K - 7; deceleration - 4; period D - 10; prices Low/High; MA method - Linear Weighted; level - 50; Bill Williams fractals are used default parameters.

The terminal window will look like this:

Determining the direction to enter the strategy

The direction of entry is determined by how the price charts and the EMA indicator are positioned relative to each other:

– buy positions open only when the price chart is above the line EMA indicator.

– sales pitch open only when the price chart is below the line EMA indicator.

Trading signals of Stochastic Fly strategy

Positions are opened by signals Stohastic indicator:

– Sell signal is formed when the main Stochastic line is above the 50 level and crosses the signal line from top to bottom.
– Buy signal is formed when the main line of the Stochastic indicator is below the 50 level and crosses the signal line upwards.

Opening a position using Stochastic Fly trading strategy

– short position We will open only when the Stohastic indicator gives a sell signal after the close of the hour candle, and the price chart at the same time is below the EMA line.

– long position We will open only when the Stohastic indicator gives a buy signal after the close of an hour candle, and the price chart is above the EMA line.

Limiting the risks in the Stochastic Fly strategy

StopLoss order is set, guided by Bill Williams' fractals.

– In a purchase transaction StopLoss is set 10 pips below the nearest lower fractal.

– In a sales transaction StopLoss is set at 10 points above the nearest upper fractal.

Closing a position in the Stochastic Fly strategy

A trailing stop signal technique (similar to TrallingStop) is used to close a position:

– upon sale StopLoss is transferred to the next appearing top fractal.

– when buying StopLoss is transferred to the next appearing lower fractal.

The deal will close automatically when it triggers StopLoss orders.