45# Stochastic Trading Method IV, “Spud's MTF FIB Breakout System”

Breakout System

Indicators:

Stochastics 5,3,3 and 14,3,3 (high/low, simple) ....use only %K line and overlay in

one indicator window.

Fibonacci set levels to:

0 label as 100

.764 label as 23.6

.681 label as 38.2

.500 label as 50.0

.382 label as 61,8

.236 label as 76.4

1 label as 0

Always draw the Fib line from the previous days low to high.

Set-up:

Draw you Fib line from the previous day's low to the high and draw it so the level lines extend into today.

Direction: See Time Frame

Time Frames: 1H chart for daily. 4H chart for weekly.

Entry:

Look for the price to break the 100 or 0 level of the Fib. You can do this by watching or setting a long order a little above the 100 level or a short order a little below the 0 level. You want the price to pass the 100/0 level not just touch it.


Meanwhile.....take a look at the stochastics....when/prior to/or just after the price breaks the 100 Fib line you can almost be certain the stoch is breaking the 80 line or higher....well we want it to be or we will wait for it to do it and then we enter the trade. Similarily if the price breaks the 0 line we want the stochastic in the 20 or below area.

You can take a few more risks. In a long; if the stochastics are climbing together after a down move and a turn up; or if the stochastics have crossed 20 and are moving up.


Exit:

When the price breaks 100 (long as an example), move your FIB line up so that the 0 line is where the 100 line was. Exit when you hit 23.6 (123.6), 38.2 (138.2) and/or so on. Let the stochastics be your guide....if they both or one stays above 80 keep riding the trade.The 14,3,3 stochastic has more bearing on the trade than the 5,3,3, however both together is perfect harmony.

Trading System
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