Keeping the idea of trading with the trend in mind, another good practice is to see yourself in the bigger picture before making the move. If you want higher probability trades, you want to make sure that you are going with the flow of a higher timeframe trend. The stochastic indicator can help you in this regard.
For instance, suppose you are in the 1-hour period and you want to go long. Before you commit, check with the daily timeframe to see where you are. If the daily timeframe shows a downtrend and the stochastic indicator shows an overbought condition, the trend will continue to go down. Going long, in this case, would be a bad idea.
But what if the daily timeframe shows a downtrend but the stochastic indicator shows an oversold condition? You go short. Your entry might be a bearish breakdown from the support level in the 1-hour timeframe.
Using Stochastic Indicator To Time Entries
Entry points can be subjective for chart or candlestick patterns. However, the stochastic indicator makes it clear for you. You either go in or stay out. If timing is a problem for you, this entry technique should work for you.
If you like to go long, do so when the stochastic indicator line goes over 20. If you like to go short, do that when the line dips below 80. But how do these two values help you determine such entry points? Again, the stochastic indicator measures momentum. If the value is higher than 20, a bullish momentum is coming and vice versa.
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