Stock Predictor trading strategy

Fast Stochastic %K Change Direction

This strategy watches only the %K line of the fast stochastic oscillator and trades its turning points.

Strategy group

Stochastic oscillator strategies

Based on

Fast Stochastic %K

Typical parameters

%K = 5 or 14 days

A buy signal is generated when %K changes direction upward – yesterday’s value is lower than both the value two days ago and today’s value. A sell signal is generated when %K changes direction downward.

Trading signals

• Buy when %K(t-2) > %K(t-1) < %K(t) – %K turns up.
• Sell when %K(t-2) < %K(t-1) > %K(t) – %K turns down.

Strategy rules

IF STO%K[t-2] > STO%K[t-1] < STO%K[t]
   THEN GO LONG
IF STO%K[t-2] < STO%K[t-1] > STO%K[t]
   THEN GO SHORT

Where STO%K[t] is today’s fast %K, [t-1] yesterday’s and [t-2] the value two days ago.

See also: how the Fast Stochastic Oscillator indicator is calculated.