How Stochastic Oscillator Technical Works
The Stochastic oscillator indicator uses time periods to calculate the fast and slow lines. The number of time periods used to calculate the %K and %D line depends on what purpose a forex trader is using the Stochastics oscillator trading indicator for.
- A trader using the Stochastic oscillator indicator in combination with a trend indicator to see overbought & oversold levels, one can use periods 10 periods.
- The default period used by the stochastics technical indicator is 12.
Forex traders should not use stochastic indicator alone for making decisions, but should use this Stochastic oscillator indicator in combination with other indicators.
In ranging markets this Stochastic oscillator technical indicator can be used to illustrate oversold/overbought levels as potential profit booking points when trading the market.
Oversold & over-bought levels by default are 20 and 80, but other traders use 30 and 70.
To look for 'overbought' region at the indicator's 80% stochastic forex oscillator mark is used
To look for 'oversold' region 20% stochastic forex oscillator mark is use.
The overbought & oversold levels are displayed as dotted horizontal lines on the stochastic oscillator trading indicator. These levels can also be adjusted to the 30 & 70 levels.
Overbought and Over-sold Levels on Stochastic Indicator
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