One of the important skills you must develop as a trader is identifying and drawing support and resistance lines. However, Support and Resistance cannot be efficiently used on their own. You’ll need to use an indicator alongside support/resistance to identify the best places to enter position. One efficient indicator is the Stochastic Oscillator.
This guide will teach you how to use the Stochastic Oscillator alongside support and resistance.
Stochastic Oscillator alongside Support and Resistance
As the price of an asset moves in any direction, there are price points where it doesn’t seem to go past for a while before finally breaking out of these price points. These price points are what traders refer to as support and resistance levels. You can read more on our guide: Support and Resistance, the two best technical indicators that IQ Option players must know.
Now how can you tell that prices are likely to remain within the support/resistance range? And how can you tell how far the price will go before rebounding?
You could try squinting to your chart and try to identify these points manually. But a less strenuous strategy would be using the Stochastic Oscillator that IQ Option provides. We’ve written a more detailed guide, Instructions for using the stochastic indicator to increase the probability of a reversal when trading on IQ Option
How to set up the Stochastic Oscillator on IQ Option
Next, select the period K (14) and period D (3) along with their color and thickness. After this, Adjust the overbought and oversold settings. In this example, I’ll let these remain at 80 and 30. Finally, click on the apply button.
Trading using Stochastic Oscillator and support/resistance
The Stochastic Oscillator has four lines. The overbought and oversold lines run horizontally and parallel to each other. The other two lines are the Period K (blue) and period D (red) lines.
Your objective when using this indicator is to look at the K and D lines’ behavior when they cross above or below the overbought or oversold lines. When the period D line cuts across the period K line from below while both lines are moving up above the oversold line, make a buy order.
If the period K line cuts across the period D line from above and goes below the period D line. Both lines are moving down under the overbought line, you should place a sell order.
Placing buy order on IQ Option
Place a buy order when the period K line crosses the period D line from under the oversold line.
If you’re using support and resistance only you can make money trading the range. However, telling where the price will break the support and resistance can prove difficult. That’s why using the Stochastic Oscillator is so important.
The Japanese candlestick chart you use is also important. If you’re trading 5 minute candles, your chart should be for a 30 minute or 1 hour time frame.
Placing a sell order on IQ Option
Place a buy order when the period K line crosses below the period D line. As both lines move down under the overbought line, these are signals to place a sell order on the IQ Option platform.
When to enter and exit trades is very important if you want to make money using the Stochastic Oscillator and support/resistance on IQ Option. Immediately the Stochastic lines cross the overbought or oversold lines, you can open longer positions. However, if they run within the period lines, your trades should be shorter.
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