Stochastic Trading AutoTrader, as the name suggests is a VertexFX client side Trading AutoTrader based on the stochastic indicator.
The stochastic indicator by itselfis a powerful indicator that provides trading entries and exits based on the strength on the trend. The Stochastic Trading Robot uses the stochastic indicator as a trigger for trade entries. It employs additional position entries based on a grid system and aggressive money management techniques.
An initial LONG market order is placed when the stochastic value falls below the ZONE_BUY value, for example 30. The concept behind the trade is that EA expects the price to reverse and rise and thereby the trade to turn profitable very soon. The initial stop-loss is set to MAX_LOTS multiplied by the TRAILING_STOP in points. Since the EA employs a grid mechanism, this ensures that the risk of ruin is reduced. Once a (any) position is profitable, the trailing stop specified by TRAILING_STOP is employed. The position is closed at trailing stop, or when the profit target specified by TAKE_PROFIT is achieved.
If the price moves adversely against the initial trade, the EA opens a new trade at a distance of GRID_DISTANCE points below the initial BUY order. Only the initial trade has a stop-loss. Subsequent trades do not have an initial stop-loss, and they are guided by the profit target and trailing stop. If the price falls further, the same procedure is repeated and a new LONG order is placed again. This process is repeated when the price falls GRID_DISTANCE points from the previously opened order. However, the total number of positions cannot exceed MAX_LOTS. This ensures that in case of a large adverse move, the EA does not accumulate huge losses and thereby reduce the risk of ruin.
Likewise for bearish trades, an initial SHORT market order is placed when the stochastic value rises above the ZONE_SELL value, for example 70.The concept behind the trade is that EA expects the price to reverse and fall and thereby the trade to turn profitable very soon. The rest of the grid and exit mechanism is identical to that of the LONG trades. Here, new trades are added when the price rises further, whereas in the case of LONG trades, new trades are added when the price falls.
The Stochastic Trading EA trades in only one direction at a time. If the initial trade was LONG, then subsequent trades will also be LONG, and vice versa if the initial trade was SHORT. The EA opens all positions using market orders. The positions are closed either when profit target is reached or when the initial or trailing stop loss it hit. Once all positions are closed, the EA starts afresh, waiting for the initial entry based on the stochastic threshold trigger.
It should be noted that the stochastic indicator is used only for the initial trade entry. It is not used for subsequent grid entries, or for trade exits.