Stochastic Oscillator Trading Analysis & Stochastic Oscillator 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 Indicator uses a scale of 0-100 to draw the indicator values.

How Do You Analyze Stochastic Oscillator 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 & %D.

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

3 Types of Stochastics Oscillators: Fast, Slow and 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 and low range of time period that's 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 candle.

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

Technical Analysis and How to Generate Trading 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 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 and 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 You Analyze Stochastic Oscillator 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 Gold Analysis in Gold

Trend reversal - identified by a classic bullish divergence setup

Over-sold/Overbought Levels in Indicator

Stochastic is mainly used to identify the potential overbought and over-sold conditions in price movements.

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

Interpret Stochastic Oscillator in Chart on Software

Over-bought - Values Greater 70

Over-sold 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

Over-sold - Values Less Than 30

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 downward.

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