The Stochastic Crossover Strategy Analysis Template creates a chart displaying a trading strategy that goes long when the market begins an uptrend and then sells when the price momentum begins to weaken. The Stochastic %K and Stochastic %D indicators are used to determine the start of an uptrend, while the Price Low indicator is used to determine weakening price momentum.

The Stochastic %K measures price momentum. Mathematically, %K ranges between values of 0 and 100. The closer %K is to 100, the stronger an indication of an up trending market. The closer %K is to 0, the stronger an indication of a down trending market. The Stochastic %D is simply a smoothed version of the Stochastic %K.

The Stochastic Crossover Trading Strategy enters a long position using a market order when the 14 day Stochastic %K crosses above the 14 day Stochastic %D. The trading strategy exits a long position with a trailing stop. Each bar, a new ‘trailing’ sell stop order is generated with a stop price set to the lowest price over the last 3 bars. When the price goes below the ‘trailing’ stop price, the long position is sold.

The trading strategy is setup initially with the following parameters:

Long Entry ‘ Stochastic %K/%D Crossover Above(High,Low,Close,14,14,1)

Long Trailing Stop ‘ PriceLow(Low, 3)

When a new chart based on the template is created, NeuroShell Trader asks if you want to backtest the trading strategy. If you answer yes, the length of the Stochastic %K, Stochastic %D, and the number of bars for the low price trailing stop will be optimized for each chart page in your chart.