This breakout approach monitors the Stochastic oscillator for sharp moves away from its recent average. When the %K line breaks above or below a volatility-adjusted threshold, it signals a burst of momentum that may start a trend.
A long position is triggered when %K crosses above the upper threshold after a period of contraction. A short position is taken when %K breaks below the lower threshold. The trade is closed when the oscillator drifts back toward its average or hits a protective stop.
The strategy is designed for intraday traders who want early entry into momentum swings. Using volatility-based bands helps filter noise so only decisive moves create signals.
- Entry Criteria:
- Long: %K > Avg + DeviationMultiplier * StdDev
- Short: %K < Avg - DeviationMultiplier * StdDev
- Long/Short: Both sides.
- Exit Criteria:
- Long: Exit when %K < Avg
- Short: Exit when %K > Avg
- Stops: Yes, percent stop-loss.
- Default Values:
- StochasticPeriod = 14
- KPeriod = 3
- DPeriod = 3
- LookbackPeriod = 20
- DeviationMultiplier = 2.0m
- CandleType = TimeSpan.FromMinutes(5)
- Filters:
- Category: Breakout
- Direction: Both
- Indicators: Stochastic Oscillator
- Stops: Yes
- Complexity: Intermediate
- Timeframe: Intraday
- Seasonality: No
- Neural networks: No
- Divergence: No
- Risk Level: Medium