MACD AND STOCHASTIC DOUBLE CROSS System

Stochastic.

Let me start by saying that there are 3 different types of stochastic oscillators: the fast, slow, and full stochastic. All of them operate in a similar manner however when most traders refer to trading using the stochastic indicator they are referring to the slow stochastic which is going to be the focus of this lesson.

The basic premise of the stochastic is that prices tend to close in the upper end of their trading range when the financial instrument you are analyzing is in an uptrend and in the lower end of their trading range when the financial instrument that you are analyzing is in a downtrend. When prices close in the upper end of their range in an uptrend this is a sign that the momentum of the trend is strong and vice versa for a downtrend.

ALSO known as oversold (below 20) and Overbought line (above 80)

• Common triggers occur when the %K line drops below 20 - the stock is considered oversold, and it is a buying signal.
• Generally, if the %K value rises above the %D, then a buy signal is indicated by this crossover, provided the values are under 80. If they are above this value, the security is considered overbought.

MACD Calculation
To bring in this oscillating indicator that fluctuates above and below zero, a simple MACD calculation is required. By subtracting the 26-day exponential moving average (EMA) of a security’s price from a 12-day moving average of its price, an oscillating indicator value comes into play. Once a trigger line (the nine-day EMA) is added, the comparison of the two creates a trading picture. If the MACD value is higher than the nine-day EMA, then it is considered a bullish moving average crossover.

It’s helpful to note that there are a few well-known ways to use the MACD:

• Foremost is the watching for divergences or a crossover of the center line of the histogram; the MACD illustrates buy opportunities above zero and sell opportunities below.
• Another is noting the moving average line crossovers and their relationship to the center line. (For more, see Trading The MACD Divergence.)

SO now we know

What is stochastic Bulish cross over

What is macd Buliish crossover

Now we will combine both to get accurate buy signals that will make us lot of money over long time
Identifying and Integrating Bullish Crossovers
To be able to establish how to integrate a bullish MACD crossover and a bullish stochastic crossover into a trend-confirmation strategy, the word “bullish” needs to be explained. In the simplest of terms, “bullish” refers to a strong signal for continuously rising prices. A bullish signal is what happens when a faster moving average crosses up over a slower moving average, creating market momentum and suggesting further price increases.

• In the case of a bullish MACD, this will occur when the histogram value is above the equilibrium line, and also when the MACD line is of a greater value than the nine-day EMA, also called the “MACD signal line.”
• The stochastic’s bullish divergence occurs when %K value passes the %D, confirming a likely price turnaround.

Crossovers In Action: Genesee & Wyoming Inc. (NYSE:GWR)
Below is an example of how and when to use a stochastic and MACD double cross.

Figure 1

Source: StockCharts.com

Note the green lines that show when these two indicators moved in sync and the near-perfect cross shown at the right-hand side of the chart.

So we will buy only when stochastic has a bullish crossover at the same time macd has a bullish crossover below zero line..

This will ensure in the midterm or long term the stock will do good and give us much gain