Trading Analysis of the Stochastic Oscillator

A lot of xauusd information can be gathered from the shapes and duration of the market tops and bottoms of the stochastic oscillator indicator.

The amount of time that the trading instrument stays overbought or oversold is an important factor when analyzing the strength of the market trends.

Gold Market Tops

Narrow market top that doesn't reach very high above 80 %

Narrow market tops mean that the bulls are weak, and that the bears have overpowered the bulls quickly. This means that the bears might push the price further downward without much resistance from the bulls.

Very high, wide market tops

Wide market top mean that the bulls are very powerful much more than the bears & the ensuing short term trend reversal (retracement), will be very short lived. Retracement on the stochastic oscillator indicator will not even reach the oversold levels before stochastic oscillator indicator moves back to the overbought levels.

Gold Market Bottoms

A narrow market bottom that doesn't reach very deep below 20 %

The narrow market bottom means that xauusd bears are weak in their attempt to push the price down, the bulls have gained control of the price pretty fast so the price movement upwards will continue for a duration of time. And the upwards trend direction will continue for quite a while.

Very wide, deep market bottoms

A wide market bottom is a sign that the bears are very strong and the sellers are in control of the price, therefore any retracement upwards won't stay for long.

Study More Guides and Lessons:

Trade Forex Trading

Trading Analysis of the Stochastic Oscillator

Gold Market Tops

Gold Market Bottoms