Stochastic star option System is a reversal trading system that allows traders to buy near low and sell near high. It’s based on regression and standard deviation bands that measure the trend and volatility of the market. It also includes stochastic oscillator which indicate the oversold and overbought conditions and helps trader to trade the early reversals.
Stochastic Star Option System Overview
Traders can identify trends very quickly from the slope of the Bands. If the slope of the standard deviation band is upside then the trend is up, if the slope of the standard deviation band is down then the trend is down.
If Standard deviation bands are flat then it means the market is in a sideways zone. Most of the time price tends to trade within the bands and these bands also provide support and resistance zones for trading. Upper bands can be used as a resistance zone and lower bands can be used as a support zone.
Stochastic Star Option System Explanation
Stochastic is a momentum oscillator and it gives us an indication when the market is at extremes. It moves between 0 to 100 and 80-20 can be used as an overbought and oversold zone.
When stochastic hit oversold zone it means that the downtrend is likely to over and a trend reversal is near & when stochastic hit overbought zone it means that the uptrend is likely to over and a trend reversal is near.
When the price hit the upper standard deviation band and stochastic is in overbought condition then the trader should look for an Automatic sell signal in form of purple start which will appear on charts.
When the price hit the lower standard deviation band and stochastic is in an oversold condition, traders should look for a buy signal in form of a green start which will appear on the chart.
The combination of Bands and stochastic helps to identify clear turning points in the market. Traders can ride the trend till the time the opposite signal appears on charts.
Stochastic Star Buy Conditions
- Price should hit the lower green band.
- Stochastic should be in an oversold condition.
- The green start should appear on charts after 1st and 2nd condition satisfied.
- Traders can hold the trade till the time the sell signal appears on the charts.
Stochastic Star Sell Conditions
- Price should hit the upper purple band.
- Stochastic should be in an overbought condition.
- Purple start should appear on charts after 1st and 2nd condition satisfied.
- Traders can hold the trade till the time buy signal appears on the chart.
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