Stochastic Oscillator MT5 Indicator Forex Technical Analysis

Developed by George C. Lane

The Stochastic Oscillator MT5 Indicator is a momentum indicator - it shows the relation between the current closing forex price relative to the high and low range over a given number of n periods. The Oscillator MT5 Indicator uses a scale of 0-100 to draw its values.

This Oscillator MT5 Indicator is based on the theory that in an up forex trend market the forex price closes near the high of the forex price range & in a downward trending market the forex price will close near the low of the forex 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 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 forex price of today’s close compares to the high/low range of the time period that's being used to calculate the stochastic.

This oscillator MT5 indicator MT5 indicator works on the principle that:

• In an uptrend, forex price tends to close at the high of the candlestick.
• In a downtrend, forex price tends to close at the low of the candlestick.

This MT5 indicator shows the momentum of the Forex trends, and identifies the times when a market is overbought or oversold.

FX Technical Analysis & How to Generate Signals

Most common techniques used for analysis of Stochastic Oscillators to generate Forex 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 MT5 indicator & the price.

This is used to determine potential Forex trend reversal signals.

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

Forex Trend reversal - identified by a classic bearish divergence

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

Forex 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 forex price movements.

• Over-bought values greater than 70 level - A sell signal occurs when the oscillator MT5 indicator MT5 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 oscillator MT5 indicator MT5 indicator goes below 30% and then rises above this level.

Oversold - Values Less Than 30

Trades are generated when the Stochastic Oscillator MT5 Indicator crosses these levels. However, overbought/oversold levels are prone to whipsaws especially when the forex market is trending upward or downward.