How Do You Use Stochastic Oscillator MT4 Technical Indicator?
Stochastic Indicator Analysis Buy & Sell Signals
Created by George C. Lane
Stochastic Oscillator Indicator is a momentum indicator - it shows the relation between the current closing price relative to the high & low range over a given number of n periods. The Oscillator uses a scale of 0-100 to plot its values.
How Do I Add MT4 Stochastic Oscillator Indicator in MetaTrader 4 Charts
This Oscillator is based on the theory that in an uptrend market the price closes near high of price range and in a downward trending market the price will close near the low of price range.
The Stochastic Lines are drawn as 2 lines - %K and %D.
- Fast line %K is the main
- Slow line %D is the signal
3 Types of Stochastics Oscillators: Fast, Slow and Full Stochastics
There are Three types are: fast, slow & full Stochastic. The three indicators look at a given chart period for examples 14 day period, and measures how the price of today's close compares to the high & low range of time period that is being used to calculate the stochastic.
This oscillator works on the principle that:
- In an uptrend, price often tends to close at the high of candle.
- In a downtrend, price tends to close at the low of candle.
This indicator shows the momentum of the market trends, and identifies the times when a market is overbought or oversold.
How to Generate Buy & Sell Signals
Most common techniques used for analysis of Stochastic Oscillators to generate signals are cross overs signals, divergence signals and over bought oversold areas. The following are the techniques used for generating trade signals
Forex Cross over Signals
Buy signal - % K line crosses above %D line (both lines heading upwards)
Sell signal - %K line crosses below the %D line (both lines heading downwards)
50-level Crossover:
Buy signal - when stochastics indicator lines cross above 50 a buy signal is generated.
Sell signal - when stochastic indicator lines cross below 50 a sell signal is generated.
Divergence Trading
Stochastic is also used to look for divergences between this trading indicator & the price.
This is used to determine potential trend reversal signal.
Upward trend reversal signal - identified by classic bearish divergence signal on the Stochastic Oscillator indicator.
Forex Trend Reversal Signal
Downward trend reversal signal - identified by classic bullish divergence on the Stochastic Oscillator indicator.
Trend Reversal Signal
Overbought & Oversold Levels on Indicator
Stochastic Oscillator indicator is mainly used to identify potential overbought levels and oversold levels on the price movements.
- Overbought Levels - Stochastic Oscillator indicator values greater than 70 level - A forex sell signal is generated when the Stochastic Oscillator indicator rises to above 70% and then falls below this overbought level.
Overbought levels
- Oversold Levels - Stochastic Oscillator indicator values less than 30 level - a buy signal is generated when the Stochastic Oscillator indicator goes below 30% and then rises above this oversold level.
Oversold levels
Trades are generated when the Stochastic Oscillator indicator crosses these overbought and oversold levels. However, Stochastic Oscillator indicator overbought and oversold levels are prone to forex whipsaw signals especially when the market is trending upwards or downward.
How to Add MT4 Stochastic Oscillator Indicator in MT4 Charts
Step 1: Open MetaTrader 4 Software Navigator Window
Open MT4 Navigator panel as shown below: Go to 'View' menu (click), then choose 'Navigator' panel (click), or From Standard Tool-Bar click the 'Navigator' button or press keyboard MT4 short-cut keys 'Ctrl+N'
On MT4 Navigator window, choose "Indicators", by Double Clicking
How Do You Use MetaTrader 4 Stochastic Oscillator Indicator?
How to Add Stochastic Oscillator MT4 Indicator
Expand the menu by clicking the expand button (+) or double click the 'indicators' menu, after this the button will appear as (-) and it will then display a list of MT4 indicators as shown below - choose the Stochastic Oscillator indicator from this list of MT4 indicators so that you can add the Stochastic Oscillator MT4 indicator on the MT4 chart.
How Do I Use MT4 Stochastic Oscillator Indicator?
How to Install and Place Custom Stochastic Indicator Meta Trader 4
If the MT4 indicator that you want to add on the MT4 charts is a custom MetaTrader 4 indicator - for example if the Stochastic Oscillator indicator that you want to add is a custom MT4 indicator you will need to first add this custom Stochastic Oscillator MT4 indicator on the MT4 platform and then compile this custom Stochastic Oscillator indicator so that this newly added Stochastic Oscillator MT4 custom indicator appears on the custom indicators list on the MetaTrader 4.
To learn how to add Stochastic Oscillator indicators on MT4 software - how do you add Stochastic Oscillator indicator window to MT4 platform? - how do you add Stochastic Oscillator custom technical indicator on MT4 platform? - How to add a custom Stochastic Oscillator custom indicator on MetaTrader 4.
How Do You Use MetaTrader 4 Stochastic Oscillator Indicator?
