Stochastic Oscillator Trading Analysis & Stochastic Oscillator Trading Indicator Signals

Developed by George C. Lane

The Stochastic Oscillator Trading is a momentum technical indicator - it shows the relation between the current closing price relative to high & low range over a given number of n periods. The Oscillator Trading Indicator uses a scale of 0-100 to draw the indicator values.

How Do I Analyze Stochastic Oscillator Trading Indicator in Chart?

This Oscillator is based on the theory that in an up trend market the price closes near high of price range & in a downward trending market the price will close near the low of the price range.

The Stochastic Lines are drawn as 2 lines- %K and %D.

Fast line %K is the main
Slow line %D is the trade signal

3 Types of Stochastics Oscillators: Fast, Slow & Full Stochastics

There are 3 types are: fast, slow and full Stochastic. 3 indicators look at a given chart period e.g. 14 day period, and estimates how the price of today's close compares to the high & low range of time period that is being used in calculating the stochastics.

This oscillator technical works on the principle that:

In an upwards trend, price oftenly will tend to close at the high of candlestick.
In a downward trend, price will tend to close at the low of candlestick.

This indicator shows the momentum of the trends, and identifies the times when a market is over-bought or over-sold.

Technical Analysis & How to Generate Signals

Most common techniques used for analysis of Stochastic Oscillators to generate signals are cross overs signals, divergence signals & overbought over-sold levels. The following are the techniques used for generating signals

XAUUSD Cross-Over Trade Signals

Buy signal - %K line crosses above the %D line (both lines heading up)

Sell trade signal - %K line crosses below the %D line (both lines heading down)

50-level Cross over:

Buy signal - when stochastics indicator lines cross above 50 mark a buy signal is generated.

Sell signal - when stochastic lines cross below 50 a sell signal is generated.

Divergence XAUUSD

Stochastic is also used to look for divergences between this technical indicator & the price.

This is used to figure out potential market trend reversal signal setup.

Upwards/rising trend reversal - identified by a classic bearish divergence setup

How Do I Analyze Stochastic Oscillator Trading Indicator on Chart on Platform?

Trend reversal - identified by a classic bearish divergence setup

Downward/descending trend reversal - identified by a classic bullish divergence setup

Stochastic Oscillator Trading Indicator Gold Analysis in Gold

Trend reversal - identified by a classic bullish divergence setup

Over-sold/Overbought Levels on Indicator

Stochastic is mainly used to identify the potential overbought and oversold conditions in price movements.

Overbought values greater than 70 level - A sell signal occurs when the oscillator rises above 70% and then falls below this technical level.

Interpret Stochastic Oscillator Trading Indicator in Chart on Software

Overbought - Values Greater 70

Oversold values less than 30 level - a buy signal is generated/derived when oscillator goes below 30% and then rises above this technical level.

No Nonsense Gold Stochastic Oscillator Trading Buy & Sell Trading Signals Indicator

Oversold - Values Less Than 30

Trade Signals are generated when Stochastic Oscillator crosses these technical levels. However, overbought/oversold levels are prone to whip-saws especially when market is trending upwards or downwards.

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