The trading strategy based on Stochastic oscillator signals was tested using the DQuant Lab platform. The algorithm triggers long positions when the %K line crosses above %D and short positions when it crosses below. Each trade is managed with a stop-loss set at 1.5 times the ATR value and a take-profit at 3 times the stop-loss.
Backtesting was conducted on hourly data from September 11, 2016, to September 11, 2026, with an initial capital of $10,000. Parameters included a stochastic period of 14, k_smooth of 3, d_smooth of 3, and an ATR period of 14. The test excluded commissions and slippage, limiting the system to one open position at a time.
Results varied across assets. Bitcoin yielded a 26.2% return with a 37.9% drawdown, while the EUR/USD pair showed a negative return of -22.8%. Other assets like silver and gold showed positive returns of 7.6% and 19.0% respectively, but suffered from significant drawdowns reaching up to 80.2%.
The author concluded that the strategy showed the most acceptable performance on oil, although high drawdowns remain a concern. The system failed to demonstrate consistent profitability across other tested instruments under the specified parameters.
