Stochastic Reversal EA Template for MetaTrader 5
The Stochastic oscillator is one of the most widely used mean reversion indicators in forex trading. This free EA template buys when Stochastic enters oversold territory (below 20) and sells when it enters overbought territory (above 80), using %K/%D line crossovers for confirmation. It includes ATR-based risk management optimized for the London session. Build it in AlgoStudio without coding, customize the parameters, and export a production-ready MQL5 Expert Advisor in minutes.
What Is a Stochastic Reversal Strategy?
A Stochastic reversal strategy uses the Stochastic oscillator to identify when a currency pair is overbought or oversold. The Stochastic measures where the current close is relative to the high-low range over a set period. It produces two lines: %K (the main line, ranging from 0 to 100) and %D (a smoothed average of %K). When %K is below 20, the pair is considered oversold and likely to bounce. When %K is above 80, it is overbought and likely to pull back.
This is a mean reversion approach \u2014 it bets that extreme moves are temporary and price will return to its average. The %K/%D crossover adds a confirmation layer: instead of entering the moment Stochastic enters oversold territory, you wait for %K to cross above %D, confirming that momentum is actually reversing. This reduces false signals and improves entry timing.
The Stochastic oscillator was developed by George Lane in the 1950s and remains one of the most popular technical indicators today. Its strength lies in identifying the exact moment when momentum shifts at price extremes, giving traders a timing edge for reversal entries.
How This EA Template Works
The London session filter (08:00\u201317:00 GMT) ensures you trade during the most liquid hours when mean reversion patterns are most reliable and spreads are tightest. ATR-based stop losses adapt to current market volatility \u2014 wider stops when the market is volatile, tighter stops in calm conditions.
The dual requirement of oversold/overbought levels AND a %K/%D crossover creates a more reliable entry than raw level-based signals alone. Raw “Stochastic below 20” triggers would enter too early, often as price is still falling. Waiting for the crossover ensures momentum has actually shifted before committing capital.
Default Parameters
These defaults work well on range-bound pairs on H1/H4. All parameters are exported as input variables so you can optimize them in the MT5 Strategy Tester.
| Parameter | Value | Type |
|---|---|---|
| K Period | 14 | Stochastic |
| D Period | 3 | Stochastic |
| Slowing | 3 | Stochastic |
| OB Level | 80 | Stochastic |
| OS Level | 20 | Stochastic |
| Stop Loss | 1.5x ATR(14) | ATR-based |
| Take Profit | 2:1 R:R | Risk-reward |
| Session | London (08:00–17:00 GMT) | Timing |
| Max Trades/Day | 3 | Risk |
| Position Sizing | 1% risk per trade | Risk |
How to Build This EA Without Coding
1. Create a new project in AlgoStudio
Sign up for free (no credit card required) and click “New Project”. Name your project “Stochastic Reversal Strategy” and open the visual builder canvas.
2. Add timing and indicator blocks
Drag a Trading Sessions block onto the canvas and select the London session (08:00\u201317:00 GMT). Add a Stochastic block \u2014 set K Period to 14, D Period to 3, and Slowing to 3. Set the overbought level to 80 and oversold level to 20. Connect the Stochastic block to the timing block.
3. Add trade execution and risk management
Add Place Buy and Place Sell blocks. Connect a “%K crosses above %D in oversold zone” condition to the Buy block, and “%K crosses below %D in overbought zone” to the Sell block. Add Stop Loss (set to 1.5x ATR with period 14), Take Profit (set to 2:1 risk-reward ratio), position sizing (1% risk per trade), and Max Trades Per Day (3).
4. Export, backtest, and optimize
Click Export to generate a .mq5 file. Load it into MetaTrader 5 and backtest on EURGBP H1 with at least 2 years of historical data. Use the MT5 Strategy Tester optimizer to find the best Stochastic settings \u2014 try K Periods from 5\u201321, overbought levels from 75\u201390, and oversold levels from 10\u201325. Demo trade for 1\u20133 months before going live.
Optimization Tips
Test more extreme overbought/oversold levels
The standard 80/20 levels are a good default, but using 85/15 or even 90/10 can significantly improve signal quality. More extreme levels mean price is genuinely overextended, making a reversal more likely. You will get fewer trades but each trade has a higher probability of success. Test multiple level combinations in the Strategy Tester.
Add an ADX filter to avoid strong trends
The biggest risk with Stochastic reversal strategies is entering against a strong trend. During powerful trends, Stochastic can stay overbought or oversold for extended periods, producing multiple losing reversal signals. Adding an ADX block with a threshold below 25 ensures you only trade when the market is range-bound, filtering out dangerous trend-against signals.
Experiment with the slowing parameter
The slowing parameter (default 3) controls how smooth the %K line is. A higher slowing value (5 or 7) produces smoother curves with fewer crossovers, giving cleaner but slower signals. A lower value (1 or 2) makes %K more responsive but noisier. Match the slowing to your timeframe \u2014 higher slowing for lower timeframes, lower slowing for H4 and above.