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Stochastic Indicator Cross-over Signals

One way to interpret and analyze the signals provided by the Stochastic Oscillator is similar to a moving average MA crossover trading method. In the Stochastic oscillator trading indicator, a crossover signal happens when the %K and %D lines crossover. These crossover signals should be taken with scrutiny as, out of the stochastic oscillator trading signal interpretations explained so far, they produce the most whipsaw signals. Whipsaws or False signals are especially common in the Fast Stochastics Oscillator Technical version.

Stochastic Crossover Signals:

  • For a Sell trade signal, a forex trader looks for the % K line to move below Percentage D line.
  • For a Buy trade signal, a fx trader looks for Percentage K line to move above % D line.

Because stochastic crossovers signals from %K & %D are often not reliable, they should be checked with other indicators to be sure.

The Stochastic Indicator Technical Centerline

In the stochastic oscillator, the centerline sits at 50% right in the middle of the panel. This shows bulls and bears are balanced. When the indicator crosses that line, it can tell you if buyers or sellers are about to take control of the trend.

Stochastic Center-Line Cross-overs Signals

  • If the Stochastic oscillator indicator is staying below the center-mark (between 40%-50%) & crosses up, then it is an indication that the bulls (buyers) are taking control of the market.
  • If the Stochastic oscillator indicator is staying above the center-mark (around 50%-60%) and then crosses below center line, it can be an indication that the bears have taken control of the market.

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