Stochastic Range Reversal

How the rule works

The slow stochastic compares a close with the recent high-low interval. The cross must originate in the specified extreme region; an ordinary middle-range cross does not qualify. Both the low ADX and low ATR conditions can persist briefly after a breakout begins, producing a characteristic losing fade into a fresh trend.

Setup

• Use only completed H1 candles with ADX below 18 and ATR below its 50-bar median. Read %K and %D at bar close.

Indicators

• Stochastic 14,3,3; SMA; Low/High
• MT5 ADX Wilder(14)
• ATR(14)

Long entry

• Buy next-bar ask when %K[2] is below %D[2] below 20 and %K[1] closes above %D[1], with Close[1] in the top half of its range.

Short entry

• Sell next-bar bid when %K[2] is above %D[2] above 80 and %K[1] closes below %D[1], with Close[1] in the bottom half.

Stop loss

• Long SL = Low[1] − 1.1×ATR14[1]; short SL = High[1] + 1.1×ATR14[1].

Exit

• Maintain a fixed target at 1.2R. At a completed close, exit long if %K >= 80 or Close[1] < min(Low[2]…Low[11]); exit short if %K <= 20 or Close[1] > max(High[2]…High[11]). Execute close signals at the next quote. Exit remaining trades after six complete H1 bars.

Risk and position size

• 0.4% equity initial risk, no pyramiding.

Costs and execution

• Model bid/ask, commissions, 0.5 typical spread of adverse slippage at each stop, and swap if held overnight; document server timezone.

When the method can fail

• Stochastic may remain extreme during breakouts. Skip central-bank, CPI and payroll windows.

Worked example

• Hypothetical previous %K/%D are 12/16, now 22/19, and the bullish candle closes in its top half. A next ask of 1.1000, signal low 1.0985 and ATR 0.0010 give SL 1.0974 and 1.2R target 1.10312. Check the exact MT5 14,3,3 Low/High settings before comparing values.

Historical test results

No tested pair meets the complete research-screen criterion. Positive cells alone do not qualify the strategy.

18 mechanical runs across 3 pairs on H1. Decisions use completed strategy bars; fills use native ICMarketsEU-Demo M15 Bid candles with explicitly modelled costs. Full window: 1 January 2025–18 September 2026. Each row starts with an independent USD10,000 account.

Interpretation: these are mechanical bar-model tests, not verified real-tick or live performance. Price rules were held fixed; subjective market-quality exclusions remain outside the mechanical model. Strategy adaptation requires a new test.

Download all test metrics and assumptions (JSON) · Download simulated trade logs and reproducible research code · Broker commission and swap documentation

Execution conventions

• Bar [0] is forming; [1] is the most recently completed bar. Unless explicitly stated otherwise, indicators use Close with zero plot shift and signals use completed bars. EMA is exponential, SMA is arithmetic and MT5 ATR is its native true-range average. Use at least 300 completed warm-up bars; a longer rule-specific requirement takes priority.
• A close-based signal is executed at the first available quote after the close, never retrospectively at the signal close. Buy at ask, sell at bid; close longs at bid and shorts at ask. A standing stop or target can fill within a bar. A gap through a stop fills at the first executable price, which can be worse than the stop.
• R means the initial entry-to-protective-stop distance, fixed at entry. Convert that distance into account-currency loss using the symbol tick size and loss-side tick value. Lots = cash risk / loss per lot, rounded down to the broker volume step. Round prices to the trade tick and recheck risk plus minimum stop/freeze distances before submitting. Budget commission and slippage separately; skip if minimum size exceeds the risk limit.
• Use one position per symbol and no averaging down. A trailing stop only tightens after a completed bar and becomes active on the next quote. The entry bar is holding bar one; a time exit executes on the quote after the specified holding bar closes. When a hard stop and a close-based exit compete, the stop already active takes precedence. With OHLC-only data, assume stop before target if both can occur in one bar; tick data is needed to resolve the order.
• The article defines the price rule. Any discretionary news exclusion changes the tested variant and must be recorded in advance. Map broker timestamps to the named London/New York time zone using historical daylight-saving offsets; do not assume a fixed UTC offset. Include spread, commission, slippage, overnight financing and triple-swap days in a profitability test.

Adapt and test your version

• Treat these inputs as a reproducible starting specification. Choose a currency pair, session and holding period that match the time you can monitor the market, then record any changes to indicator periods, thresholds, stop distance or exits as a new version.
• Change one hypothesis at a time. Reserve a later period and additional pairs for evaluation before looking at their results. Include your account’s actual trading and financing costs, compare small parameter changes, and forward-test on demo. A selected profitable window does not validate the strategy or its modified version.

Reproduce the chart in MT5

• Open EURUSD on H1. Add the indicators listed above through Insert → Indicators; use Close and zero shift unless a different setting is specified. The Data Window displays exact values for the selected completed candle.
• Compare the signal candle with the required earlier bars before moving forward. Use the crosshair to read prices and times. For custom channels, session levels or Supertrend, reproduce the formula in this guide and check the calculation before relying on an external indicator.
• Draw entry, initial SL and target only after a candle has satisfied every condition. Label planned levels as plans; they do not demonstrate a historical fill. The featured chart is genuine historical MT5 context and is not a trade-performance report.

Sources

• Stochastic Oscillator — %K/%D settings and platform use.