Stochastic MetaTrader 4 Indicator Signals

Developed 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 and %D.

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

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

There are Three types are: fast, slow and full Stochastic. Three indicators look at a given chart period for examples the 14-day period, and measures how the price of today’s close compares to the high/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 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 Forex trends, and identifies the times when a market is overbought or oversold.

MetaTrader 4 Indicator & Generating Signals

The most common techniques used for MetaTrader 4 Indicator of Stochastic MetaTrader 4 Indicators to generate trading signals are cross overs trading signals, divergence signals & overbought over-sold levels. Following are the techniques used for generating signals

FX 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 Crossover:

Buy signal - when stochastic lines cross above 50 a buy signal is generated.

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

FX Divergence Forex Trading

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

This is used to determine potential Forex trend reversal signals.

Upward/rising trend reversal - identified by a classic bearish divergence

Trend reversal - identified by a classic bearish divergence

Downwards/descending trend reversal - identified by a classic bullish divergence

Trend reversal - identified by a classic bullish divergence

Overbought/Oversold Levels on Technical Indicator

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

• Over-bought values greater than 70 level - A sell signal occurs when the MetaTrader 4 Indicator rises above 70% and then falls below this level.

Overbought - Values Greater 70

• Over-sold values less than 30 level - a buy signal is 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 whipsaws especially when the forex market is trending upward or downward.