A semaphore signal indicator determining the moments of a directional price change on several bars, the number of bars is specified in the indicator input parameters.
Both High and Low of a candlestick series are used in the analysis.
Author: Nikolay Kositsin
Save Money by Getting Better Trade Entries (adapted from dailyfx article)
Identifying an Uptrend
Identifying a Downtrend
Using Slow Stochastic to Identify Pullbacks
Once we identify a chart that is trending up or down, we need to add our
Slow Stochastic indicator to the chart. I prefer using the settings
(15, 5, 5) rather than the default (5, 3, 3). These settings slow down
the indicator further and provides (in my opinion) more reliable
signals. In an uptrend, we want to take any Slow Stochastic buy signal
that occurs in oversold territory, below 20. (In a downtrend, we want to
take any Slow Stochastic sell signal that occurs in overbought
territory, above 80.)
The image below shows a great buy entry on the GBPUSD where price was
trending upward, pulled back resulting in an oversold Slow Stochastic
reading, and then had a Slow Stochastic signal to buy in the direction
of the upward trend.
Uptrend with Slow Stochastic Entry – GBPUSD Daily Chart
The image above shows the same trade we placed on the USD/CNH, but with
much better results. Rather than using a traditional trailing stop that
blindly moved up as price moved up, we moved our stop only when a new
swing low was created. We set our stop below each new swing low as price
progressed and were able to ride this monster uptrend 1500 pips before
being stopped out.
It can take some time to be able to “eyeball” significant swing highs
and lows and know exactly when a stop should be moved. But, there is a
really handy tool that can be used to identify these levels more
No Strategy is complete without an exit strategy. For the trade example
above, we will need to set our stop beyond the most recent swing low. I
like to set my stop anywhere from 5-25 pips away from the low depending
on the time frame and currency pair. With a trade size using sound money
For our limit, I suggest using a limit that is twice the distance as our
stop. This gives us a positive risk:reward ratio of 1:2 with a
breakeven win rate requirement of only 33%. So as long as we are correct
on 1/3rd of our trades or more, we should at least be breakeven traders
using this risk:reward ratio. Both the stop and limit used for this
trade can be seen below.
Downloading & Installing the Asymmetric Fractals Indicator
Pulverizing the Pullback
In this lesson, we discussed the importance of identifying a trend,
locating pullback entries and how to manage each trade moving forward.
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