4 Timeframe Stochastic

The 4 Timeframe Stochastic tells about the trend’s direction by measuring it on four timeframes. This guide will mention what the indicator is all about and how you can trade it.

What is the 4 Timeframe Stochastic?

The 4 timeframe applies the Stochastic oscillator to identify the trend’s strength of four different timeframes. The traditional Stochastic oscillator fluctuates between a certain range and identifies overbought and oversold levels. When the price is near the 20 level, it’s an oversold level, and we can expect a bullish reversal. Conversely, if the price is near the 80 level, it’s an overbought condition, and there is a chance of a potential bearish reversal.

The 4 timeframe uses these overbought/oversold calculations to plot four bars below the chart to illustrate these timeframes. The first one is the current timeframe and then the subsequent timeframes. Each bar has pink and green squares, which show the trend’s strength. If the square is pink, it’s a downtrend, and the green square marks an uptrend.

4 Timeframe Stochastic
4 Timeframe Stochastic

4 Timeframe Stochastic Strategy

The 4 Timeframe Stochastic is not a typical buy or sell indicator; you need to use it as a confirmation signal. To use the indicator in a strategy, you can combine standard Stochastic.

When the Stochastic is near the overbought level (80), and the 4 Timeframe Stochastic shows a pink square, it suggests a bearish reversal, and you can take short positions.

On the other hand, when the Stochastic is near the oversold level (20), and the 4 Timeframe Stochastic shows a green square, it illustrates a bullish reversal.

It’s important to note that 4 Timeframe Stochastic works on every timeframe. The indicator automatically plots the next three timeframes according to the current timeframe. For instance, if you chose 4 Hour, then indicator plots Daily, Weekly, and Monthly timeframe.

Buy Signal

  • The 4 Timeframe Stochastic should show a green square.
  • The Stochastic must be near the oversold level.
  • Wait for the price to go upward and then enter.
  • You could place a stop-loss at the recent low.
  • You could set take-profit at the recent high or exit the trade when the Stochastic oscillator reaches near the overbought level.
4 Timeframe Stochastic buy signal
4 Timeframe Stochastic buy signal

Sell Signal

  • The 4 Timeframe Stochastic should show a pink
  • The Stochastic must be near the overbought
  • Wait for the price to go downwards and then enter.
  • You could place a stop-loss at the recent high.
  • You could set take-profit at the recent low or exit the trade when the Stochastic oscillator reaches near the oversold.
4 Timeframe Stochastic sell signal
4 Timeframe Stochastic sell signal

4 Timeframe Stochastic Pros & Cons

Before using 4 Timeframe Stochastic, you should know its pros and cons.

Pros

  • The indicator tells trends of multiple timeframes.
  • Combined with Stochastics, it can present a good entry and exit point.

Cons

  • You may need to apply other indicators for further signal

Conclusion

The 4 Timeframe Stochastic calculates the trend’s strength on four different timeframes. It uses the traditional Stochastic and plots pink and green bars to identify the current trend. To trade, you can use the standard Stochastic oscillator and the 4 timeframes Stochastic.  However, you may want to confirm all signals with additional market analysis. I would be looking at price action including support and resistance levels along with any bullish or bearish candlestick patterns. As with any forex strategy, you should have excellent money management so that one bad trade does not cancel out a consecutive run of winners. You can always practice trading on a forex demo account to begin with to improve your trading skills and build up your confidence. Most forex brokers provide a free demo account, including IC Markets. They are my top choice for both manual and automated forex trading systems. This is because they have tight spreads, quick execution speeds, low commission fees and excellent 24/7 support.

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