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3 Types of Forex Stochastic Indicators

Fast, Slow and Full Stochastic

There are three types of Forex Stochastic Oscillator Indicators: fast, slow and full stochastic oscillator indicator.

All the 3 versions of this stochastic oscillator forex indicator look at a given period for example the 10-day period, and measure how today's forex price close compares to the high and low range of the time period that is being considered in the forex calculation of stochastic oscillator.

Stochastic oscillator forex indicator works based on the principle that:

  • During an upward forex trend, forex price action tends to close at the high of the candle.
  • During a downward forex trend, forex price action tends to close at the low of the candle.

Stochastic Oscillator forex indicator shows the strength of the Forex trends, and identifies times when a forex currency is oversold or overbought.

Fast Stochastic Oscillator Indicator

Fast Stochastic Oscillator Indicator - fast stochastic oscillator forex indicator plots two lines, one solid and one dotted on the indicator section. These two lines are called the %K line and %D line. In this versions the %K and %D lines are calculated differently from the other versions, so as to add extra smoothing.

One disadvantage of using this fast stochastic forex indicator version is that the %K and %D lines are too sensitive and they often give forex trading whipsaws when they get to the overbought and oversold levels. The fast stochastic lines are prone to fake forex trading signals/whipsaws.

Slow Stochastic Oscillator Indicator

Slow Stochastic Oscillator Indicator - slow stochastic oscillator forex indicator smooths out the price data used for the original calculation and it is used by many Forex traders. This slow stochastic forex indicator version is less prone to whipsaws compared to the fast stochastic version.

For the slow stochastic forex indicator. A 3 period moving average is used to smooth out the stochastic lines. The moving average is not that of the forex price action but of the stochastic oscillator indicator lines data.

Full Stochastic Oscillator Indicator

Full Stochastic Oscillator Indicator - this stochastic oscillator does not use a fixed moving average period, like the slow forex stochastic oscillator version above. Forex traders don’t want to use a fixed setting to calculate the stochastic forex indicator.

Because of this reason the full stochastic was developed by forex traders and it is more flexible than the earlier two forex stochastics oscillator versions.

Full stochastic oscillator forex indicator version allows forex traders to choose the period they want for the fast and slow forex stochastic indicator line.

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