Does Trading Stochastics Actually Work?

It's obvious that traders love using indicators on their charts, and if there was one indicator that most traders like to use, above all else it would have to be stochastics. But does this indicator actually help your trading?

For those that don't know what stochastics are, they are basically a tool that traders use to tell them when the a trading instrument is overbought or oversold. There are a couple of different ways that they can be used.

For some, they trade when the indicator shows that it is below the 20 range, they buy because they feel the price is oversold and they are getting in at a a good price. When the stochastics lines go above 80, some traders sell, because they feel the market is overbought.

Another way many traders trade the stochastics is on the line crosses. Whenever the two stochastics lines cross each other going upwards, the trader also buys, and whenever the two stochastics lines cross each other going downwards, they sell.

And there are also plenty of traders that combine the trading rules to form their own system.

But the question at hand is, do they work???

From my experience......no. Truthfully stochastics suffer from the problem of 99.9% of all indicators. For starters, they are lagging. These type of indicators tell you what the market has already done, not what its about to do. The rules behind indicators like these, is that they are completely random. The market doesn't care about these mythical 20, 80 areas. There is no way you can predict whether a market is oversold or overbought when it hits these areas.

The other obvious flaw, is that you don't even need to look at the price to tell you when to buy or sell, since all you are looking at is your indicator to make that decision for you. These are the kind of questions you have to ask yourself when you trade with indicators. What are they actually telling you about the market???
John Templeton has been a successful forex trader after learning how to trade price action

Once he understood that all he needed to trade forex was on a plain chart with no indicators, his profits soared.

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