What Is The Qstick Indicator & How To Trade With It

QSTICK INDICATOR EXPLAINED

The Qstick indicator was developed by Tushar Chande and Stanley Kroll in their work “The New Technical Trader” (John Wiley & Sons, New York, 1994, 256 pages). Qstick is a momentum price oscillator, a simple moving average of the difference between the close price and the open price, fluctuating relative to the zero level.

What is the Qstick indicator?

Qstick analyzes the difference in closing and opening prices, like numerical expression of the “candlestick” method:

  • When the current closing price is higher than the opening price of today, the buying pressure is fixed
  • If the current closing price is less than the opening price of today, the selling pressure is stated.

Like other oscillators, Qstick is interpreted in several ways. The Qstick indicator works more like MACD that indicates the trend based on zero line. If the indicator is above the zero line, it is considered bullish otherwise bearish. However, the Qstick indicator is little different as it also indicates the strength of a trend and when a trend starts weakening.

Qstick indicator on chart
Qstick indicator on chart

Qstick calculation

QStick = [closing price – (opening price X n)] X SMA

While, n = period of time

The QStick simply constructs a simple moving average for n-periods that shows the difference between open and close prices.

QStick = MA (n, (Close – Open)).

Where n is the number of periods for moving average calculation.

How to use the Qstick indicator?

The Qstick indicator can be used to build a trend trading strategy. Indicator values ​​above zero indicate a predominance of bullish candles and a stronger buying pressure over a period of time. This is equal to the length of the moving average compared to selling pressure and vice versa. Indicator values ​​below zero indicate a predominance of bearish candles and a stronger selling pressure over a period of time equal to the length of the moving average. Thus, trading signals are given based on the rule of intersection of the chart with the zero line.

Using Qstick indicator
Using Qstick indicator

A trend in the Qstick indicator can also be used as a signal generator. The rising trend of Qstick is considered a “bullish” signal, while the falling trend is regarded as a “bearish” signal.

The QStick indicator can effortlessly recognize both oversold and overbought conditions. There are numerous ways to use the Quick stick indicator:

Oversold & Overbought

If the Qstick indicator crosses the zero line to the upside and goes too high, then it is considered overbought. Conversely, if the indicator crosses zero line and goes far below, the it is considered oversold condition.

Qstick indicator overbought-oversold
Qstick indicator overbought-oversold

Extreme levels

If the Qstick indicator reaches at extreme low levels and then starts turning to the upside, there is potentially a buy call. On the other hand, when the Qstick indicator reaches at extreme high levels and then starts turning down, there is potentially a selling opportunity.

Qstick extreme levels
Qstick extreme levels

Divergence

You can find the price action divergence between indicator and the price and trade in the direction of the indicator.

Qstick indicator divergence
Qstick indicator divergence

Qstick indicator trading strategy

Here’s a straightforward trading strategy solely based on the Qstick indicator.

Qstick indicator buy strategy

  • The sky-blue bar should appear above the zero line.
  • Wait for the bullish bar to appear before entry.
  • Place the stop-loss slightly below the swing low.
  • We may look to exit when the brown bar appears on the upside extreme.
Qstick indicator buy setup
Qstick indicator buy setup

Qstick indicator sell strategy

  • The brown bar should appear below the zero line.
  • Wait for the bearish bar to appear before entry.
  • Place the stop-loss slightly above the swing high.
  • We may look to exit when the sky-blue bar appears on the downside extreme.
Qstick indicator sell setup
Qstick indicator sell setup

Qstick indicator conclusion

Qstick indicator is a momentum oscillator that works in a similar way as the popular MACD indicator. The zero line helps to determine the trend whilst the indicator can also help to determine the strength of a trend.

The Qstick indicator can be used on your trading platform charts to help filter potential trading signals as part of an overall trading strategy.

I would prefer to use the majority of technical indicators such as the Qstick indicator on the 1-hour charts and above. I tend to find that these charts contain less market noise than the lower time frames and thus give more reliable signals for my forex trading strategies. This also means that I spend less time staring at charts and can also set alert notifications to let me know when price has reached certain levels or a particular indicator value has been reached.

The Qstick indicator is just one indicator amongst thousands. I would not build a trading system alone, but rather combine with other technical indicators such as moving averages, Parabolic SAR, Stochastic Oscillator, RSI, ADX and price action analysis.

Of course, every trading system will generate false signals which is why money management is so important. I would personally be implementing sensible money management and only take traders that give me a favorable risk to reward ratio, ideally of at least 1:3. This means that one losing trade does not wipe out consecutive winners.

The methods of implementing the Qstick indicator into a trading strategy that are outlined within this article are just ideas. I would always ensure that I have good money management, trading discipline and a trading plan when using any forex strategy.

Furthermore, I would combine multiple technical analysis, fundamental analysis, price action analysis and sentiment analysis to filter all entries. You should trade forex in a way that suits your own individual style, needs and goals.

If you would like to practice trading with the Qstick indicator, you can open an account with a forex broker and download a trading platform. If you are looking for a forex broker, you may wish to view my best forex brokers for some inspiration.

Happy trading!