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Using Stochastics to Ferret Out Trades

Stocks in this article: DBO GLD

GLD, above, also had a couple of successful trades using this method. Note the buying indication in late July, and the selling indication in September. Notice how, on these charts, stochastics gave buying indications in advance of the moving average crossovers, which then confirmed the stochastic moves, and allowed you to ride the trend.

To conclude, combining stochastics and moving averages can ferret out some interesting and profitable moves in the markets. Sometimes the best part of the move occurs when the stochastic becomes overbought or oversold, without giving an opposite indication. We use this indicator to get the jump on a moving average signal, and then use the moving averages to add more to, and then close out a trade.

Fred Meissner is founder and publisher of The Fred Report. Fred is a CMT and past President of the Market Technicians Association (MTA). He recently left Merrill Lynch's Market Analysis Department and Sector Strategy Department to form The Fred Report.�A detailed bio is here:Fred Meissner.
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