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To be successful in trading you need to take everything it shows you into consideration. In the world of short term trading, priority revolves around day to day and intraday movements. Still, if you don’t follow the bigger picture and don’t notice everything that reflects on this day to day movements, you may find yourself lagging behind. Only when everything is in sync, you can make sure that the decision you made is right on the money. The Stochastic Power Play has a goal to help short term traders find all the right indications and perfect time for trading.
The important thing to know about Stochastic oscillator is that it shows that a near-term market movements might be random, but nevertheless follow a longer term trend. Movements rocking back and forth still form a path going in the same direction. Stochastic is a powerful signal giver, but the most important characteristic of this tool is the so-called trend-following crossover. Crossing over can become a strong signal in two different occasions, providing overbought or oversold indications. Two stochastic lines, %K and %D may cross each other when above or below the horizontal lines that follow them. It’s easy setting this indicator up in the IQ Option platform when clicking on the bottom left corner of the screen. You can use it with default settings, or set it up to your liking and needs.
It is important to take multiple time frames when practicing this strategy, using the longest one to set the trend of the market. Long term time frame represents one day, the middle one being one hour, and the shortest one can be set to 1 minute or 10 minutes depending on your preferences. Following all three time frames is equally important.
The right move would be to wait for a strong signal to show in the daily chart. Both stochastic lines moving in the same way as the crossover mark a strong signal. This will occur simultaneously with the key market news, shifting away from a long lasting trend or other strong movements. Longest time frame will rise if stochastic moves up succeeded by an uptrend crossover, while it falls back when stochastic goes down following a downtrend crossover.
Once that indication is confirmed, move your attention to the one hour time frame and check out the status that goes on there. It is again advised to wait for yet another strong signal to appear. If that signal is in sync with the daily time frame, it means a trade is heading in the same direction as daily time frame, and you can then check out the lowest time frame. If this is not the case, you will need to wait for another crossover to happen while being careful to follow the higher time frame to ensure your analysis is correct.
The shortest time frame is where it all comes together. If the alignment is good on the hourly and the daily time frames, it means everything is in sync and moving in the same direction. From here, all crossovers in line with that analysis represent strong entry signals. These signals remain viable until prices reach the area of the move as marked by the hourly charts.
When that happens, traders need to cool off and start from the beginning, following the daily chart movements.