Perhaps, everybody knows a fairy tale about heroic orphan child Dorothy Gale and her little dog Toto whose house was blown into Oz by a tornado. It seems that traders while creating the OzFX trading system became reminiscent of their childhood and decided to name their strategy after the marvelous land from Baum’s tale. As the result, we have a powerful and very profitable trading strategy with a bit odd name. Enough talk, let’s find out how to trade with this strategy.
Any currency pairs
Tools: Stochastic indicator + AC (Accelerator Oscillator) technical indicator
How to trade Stochastic and AC
Traders are always hunting for ways to catch new trends in development. Stochastic is a handy weapon for this purpose. It is made up of two lines. The red line is a signal line and the green line is the line that trails the price movement. Two lines are bound between 0 and 100. There are also two additional marks (20% and 80%) which indicate the overbought/oversold areas.
“Sell signal” occurs when green line touches or breaks 80% level and crosses the signal, red line (the green line should be below the red line after crossover).
“Buy signal” occurs when the green line reaches/surpasses the 20% mark and crosses 20% line (the green line should be above the red line after crossover).
The indicator has two scales: positive and negative. The middle line of the oscillator is a “0” mark which separates -/+ areas. If histogram crosses it and moves downwards – it’s a “sell signal”. If histogram crosses zero mark and moves upwards – it’s a “buy signal”.
OzFx trading rules
The main indicator for the entry point is AC. Stochastic is used as a filter of false entries.
If Stochastic gives you a “buy signal”, and AC green bands move into the positive area, you can enter the market long.
If Stochastic gives you a “sell signal”, and AC red bands move into the negative area, you can enter the market short.
Once you defined your entry point you should open not just one, but 5 lots. To each lot you should assign stop-loss at 100 pips. Take-profits should be placed in the following order:
Trade with 5 Lots with Stop Loss 100 pips away
Take Profit on 1st Lot at 50 pips. Move Stop Loss to Break Even (BE).
Take Profit on 2nd Lot at 100 pips.
Take Profit on 3rd Lot at 150 pips.
Take Profit on 4th Lot at 200 pips.
Let the 5th Lot run until you see an opposite entry signal.
Nota bene! When the first order reaches take-profit, you should shift other orders into “breakeven” point.