Introduction to the Stochastic Buy Sell Arrows Indicator
Most trade entry signals are based on a reversal of trend or momentum. However, many traders seem to have overlooked the viability of a reversal signal based on mean reversals. Mean reversals are actually one of the most reliable reversal signals that a trader could use especially when these signals are used in the right context.
The Stochastic Oscillator is probably one of the most popular technical indicators when it comes to identifying mean reversals coming from overbought and oversold price levels. Let us explore the Stochastic Buy Sell Arrows indicator, which is a mean reversal signal indicator based on the Stochastic Oscillator.
What is the Stochastic Buy Sell Arrows Indicator?
The Stochastic Buy Sell Arrows indicator is a custom technical indicator which provides mean reversal signals based on the Stochastic Oscillator (SO). It plots green arrows pointing up whenever it detects a bullish reversal, and pink arrows pointing down whenever it detects a bearish reversal.
How the Stochastic Buy Sell Arrows Indicator Works?
The Stochastic Buy Sell Arrows indicator uses an underlying Stochastic Oscillator to detect mean reversal signals. As such, it only detects signals that come from an overbought or oversold price level. This is based on the Stochastic Oscillator lines breaching above 80 and crossing over back down or dropping below 20 and crossing over back up. The Stochastic Buy Sell Arrows indicator then plots the signal arrows whenever these mean reversal indications occur.
How to use the Stochastic Buy Sell Arrows Indicator for MT4
Since the Stochastic Buy Sell Arrows Indicator is based on a Stochastic Oscillator, it also has variables that pertain to adjusting its underlying Stochastic Oscillator, which are the K Period, D Period, and Slowing.
It also allows the overbought and oversold threshold to be adjusted from the standard 80 and 20.
Lastly, it also allows alerts and pop-ups to be enabled.
The signals produced by the Stochastic Buy Sell Arrows indicator are mean reversal signals. As such, these signals can work well whenever the signals are in confluence with the long-term trend after a deep retracement. It can also work well whenever the signal occurs on a support or resistance zone.
Buy Trade Setup
When to Enter?
Identify a support zone based on a major pivot low. Open a buy order as soon as the Stochastic Buy Sell Arrows indicator identifies a bullish reversal signal developing within the zone. Set the stop loss below the entry candle.
When to Exit?
Set the take profit target on the next resistance level.
Sell Trade Setup
When to Enter?
Identify a resistance zone based on a major pivot high. Open a sell order as soon as the Stochastic Buy Sell Arrows indicator identifies a bearish reversal signal developing within the zone. Set the stop loss above the entry candle.
When to Exit?
Set the take profit target on the next support level.
Conclusion
The Stochastic Buy Sell Arrows indicator is a very useful technical indicator especially when used in the right trading context. It may not always yield the highest possible risk-reward ratios but it does tend to be very accurate especially when trades are managed correctly.
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