---
title: 'Best Stochastic Indicator Strategy for Day Trading Forex & Stocks'
source: 'https://youtube.com/watch?v=vLbLZWi_Ypc'
video_id: 'vLbLZWi_Ypc'
date: 2026-08-05
duration_sec: 560
---

# Best Stochastic Indicator Strategy for Day Trading Forex & Stocks

> Source: [Best Stochastic Indicator Strategy for Day Trading Forex & Stocks](https://youtube.com/watch?v=vLbLZWi_Ypc)

## Summary

This video presents several stochastic indicator strategies for day trading forex and stocks, emphasizing the importance of combining the stochastic with trend-following indicators like the 200 EMA and MACD to avoid trading against the trend. The presenter explains why they prefer stochastic over RSI and provides detailed entry, exit, and risk management rules.

### Key Points

- **Stochastic Indicator Overview** [00:03] — The stochastic is a popular indicator used as a momentum indicator and to predict reversals by identifying overbought and oversold levels.
- **Stochastic vs RSI** [00:33] — Stochastic moves between overbought and oversold levels cleaner and smoother than RSI, and the K and D lines provide additional signals for direction.
- **Common Beginner Mistake** [01:53] — Beginners often buy when stochastic is oversold and sell when overbought, but this fails in strong trends because the indicator can stay at extremes for long periods.
- **Stochastic + 200 EMA Strategy** [02:51] — If price is above 200 EMA and stochastic is oversold, take a buy; if price is below 200 EMA and stochastic is overbought, take a sell. Wait for stochastic to cross back inside the lines for confirmation.
- **Exit Strategy** [03:43] — For buy positions, place stop loss below nearest swing low and profit target at 2x stop loss. For sell positions, place stop loss above nearest swing high and profit target at 2x stop loss.
- **Stochastic + Support/Resistance Strategy** [05:20] — Combine stochastic with trend lines and support/resistance. When price touches a trend line and stochastic is oversold, wait for cross back inside to buy; similarly for resistance and overbought.
- **Stochastic + MACD + 200 EMA Strategy** [07:02] — If price is above 200 EMA, stochastic oversold, and MACD line crosses above signal line, take a buy. For sells, price below 200 EMA, stochastic overbought, and MACD crosses below signal line.

### Conclusion

The video provides multiple high win-rate stochastic strategies that emphasize trend alignment and confirmation to avoid common pitfalls. The key is to combine the stochastic with trend indicators and wait for confirmation before entering trades.

## Transcript

with the stochastics indicator so without further ado let's get on with the video the stochastics is one of the most famous and the reason that most traders use it is because the indicator can be utilized
in various ways it can be used as a momentum indicator and it can also be used to predict reversals by identifying overbought and oversold levels on the market now as you may know a similar indicator that
levels is the rsi and so what makes the stochastics better than the rsi firstly if you compare the two you can
actually see that the sarcastics tend to move between overbought and oversold levels a lot cleaner compared to the rsi which this secondly the movement of the stochastics
is a lot smoother compared to the rsi which is much more erratic another lines called the k percentage and the d percentage which
can actually give us additional signals here's how so when you're using the rsi there is no way of predicting if the line is going to go upwards or downwards but if you're using the stochastics
you can actually utilize the k and d lines to predict where the stochastics if the k line crosses below the d line it indicates that the sarcastics is heading downwards and if the k line crosses above the d
indicates that the sarcastics is heading upwards so those are a couple of reasons on why i prefer stochastics over rsi okay so how do we actually use the stochastics
beginners make when trading this indicator position when the indicator hits oversold position when the indicator hits overbought
strategy is because if the market is on a strong the stochastics can actually remain at overbought or oversold levels for long periods of time for example here we can see that the
market is on a strong uptrend if you decided to take a sell position overbought let's see what happens the price instead and you will lose your money because remember trading against a trend
is never a good idea so instead of using the stochastics by itself i like to complement this strategy by adding another indicator that can detect the medium-term trend and that is the 200 ema
strategy knowing that i'm always following the trend and how the strategy works is very simple if the price is above the 200 ema while the saw classics is that oversold
you take a buy position and it's the same for sale positions as and it's the same for sale positions as well if the price is below the 200 ema while the sarcastics is at overbought you take a sell position
but keep in mind you cannot immediately take a position just because the stochastics is that overbought or oversold actually confirm that the reversal will happen
by waiting for it to cross back inside the overbought or oversold lines like this now let's discuss our exit strategy so if you're taking buy positions you want to place your stop loss below the
and set your profit target at two times your stop loss and if you're taking sell positions you want to place your stop loss above the and set your profit target at two times your stop loss
so now let's look at this strategy in action in this chart we can see that the price is above the 200 ema is above the 200 ema meaning we only take buy signals next
the oversold levels but remember don't take any positions yet you need to wait for it to cross back inside the oversold lines first once this happens you take a buy position next
you place your stop loss below the nearest swing low your stop loss and as you can see the price hits our profit target so this counts as a successful trade
let's look at another example in this chart we can see that the price is below the 200 ema meaning we only take cell signals then the overbought levels next you wait for the indicator to cross
back inside the overbought lines once this happens you take a sell position now for stop loss you place it above the nearest swing high and set your profit target
at two times your stop loss and as you can see this trade ended up being profitable now a similar strategy that traders is by combining the stochastics with simple support resistance and trend
lines so now let's analyze the chart here uptrend and so we can draw a trend line here multiple times next we can actually see a pattern
towards the trend line while the stochastics is that oversold it tends to reverse times already prices hit and reverse hit and reverse
so now as we look at the current price we can see the same pattern forming prices went down to the trend line while the stochastics is at oversold but remember you need to wait for the stochastics to cross outside of the
oversold lines first once this happens you take a buy once this happens you take a buy position we can see that price has rejected this level multiple times
here next we spotted a similar pattern every time prices went up to resistance while the stochastics is that overbought it tends to reverse downwards and now as we look at the current price
we can see the same pattern forming again prices went up towards the while the sarcastics is that overbought next i'm waiting for the sarcastics to cross outside of the overbought lines
position [Music] often utilize is by combining the stochastics with the is by combining the stochastics with the macd indicator and the 200 ema this is
how the strategy works if the price is above the 200 ema while the sarcastics is that oversold and the macd line crosses above the signal line you take a buy position it's the same
for cell positions as well if the price is below the 200 ema while the stochastics is at overbought and the macd line crosses below the signal line you take a sell position now for your
exit strategy if you're taking buy positions you want nearest swing low and set your profit target at two times your stop loss and if you're taking cell positions you
want to place your stop loss above the swing high your stop loss let's look at this strategy in action in 200 ema
while the stochastics is that oversold meaning we are looking to buy however we won't be taking positions before we see a confirmation from the macd once this happens you take a buy
now for your stop loss you place it below the nearest swing low your stop loss and as you can see this trade ended up being profitable
chart we can see that the price is below the while the stochastics is at overbought meaning we're looking to sell next we can see that the macd line crosses below the signal line
position and for your stop loss you place it above the nearest swing high and set your profit target at two times your stop loss and as you can see this trade ended up
[Music] so i just revealed to you multiple high win rate stochastic strategies that you can use right now and all i ask for in return is for you
liking the video and subscribe two clicks but it means so much to me and you can also check out my other videos as well so thank you guys for watching and i'll
so thank you guys for watching and i'll see you in the next video