Stochastic MetaTrader 4 Indicator Signals
Created by George C. Lane
The Stochastic MetaTrader 4 Indicator is a momentum indicator - it shows the relation between the current closing price relative to the high and low range over a given number of n periods. MT4 Indicator uses a scale of 0-100 to plot its values.
This MT4 Indicator is based on the theory that in an uptrend market the price closes near the high of the 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 signal
3 Types of Stochastics Trading Oscillators: Fast, Slow & Full Stochastics
There are Three types are: fast, slow & full Stochastic. 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 and low range of the time period that's being used to calculate the stochastic.
This MT4 Indicator works on the principle that:
- In an uptrend, price oftenly tends to close at the high of the candlestick.
- In a downtrend, price tends to close at the low of the candlestick.
This indicator shows the momentum of the market trends, & identifies the times when a market is overbought or oversold.
MetaTrader 4 Indicator and Generating Signals
The most common techniques used for MetaTrader 4 Indicator of Stochastic MetaTrader 4 Indicators to generate signals are cross overs signals, divergence signals and overbought oversold levels. Following are the techniques used for generating signals
Forex Crossover Signals
Buy signal - %K line crosses above %D line (both lines heading up)
Sell signal - %K line crosses below %D line (both lines heading down)
50-level Cross-over:
Buy signal - when the stochastics lines cross above 50 mark a buy signal gets generated.
Sell signal - when stochastic lines move below 50 a sell signal gets generated.
Divergence FX Trading
Stochastic is also used to look for divergences between this trading indicator and the price.
This is used to determine potential trend reversal signal.
Upward/rising trend reversal - identified by a classic bearish divergence
Trend reversal - identified by a classic bearish divergence
Downward/descending trend reversal - identified by a classic bullish divergence
Trend reversal - identified by a classic bullish divergence
Overbought/Oversold Levels on Indicator
Stochastic is mainly used to identify potential overbought & oversold conditions in price movements.
- Overbought values greater than 70 level - A sell signal forms when the MetaTrader 4 Indicator rises above 70% and then falls below this level.
Overbought - Values Greater 70
- Oversold values less than 30 level - a buy signal gets generated when the MetaTrader 4 Indicator goes below 30% and then rises above this level.
Oversold - Values Less Than 30
Trades are generated when the Stochastic MetaTrader 4 Indicator crosses these levels. However, overbought/oversold levels are prone to whip-saws especially when the forex market is trending upward or downward.
