Trade Forex Trading

Stochastic Trading Indicator Over-bought & Oversold Levels

Stochastic oscillator forex indicator is used to look for overbought/oversold forex signals. Overbought levels are above 80% level & over-sold levels are below 20% level.

Key is to not only look at Stochastic oscillator forex indicator when the %K or %D lines touch or cross overbought/oversold, but also when they cross over and back through these levels.

Just as with other forex momentum indicators such as RSI indicator the Stochastic oscillator forex indicator can stay inside the overbought & oversold levels for some time. When this stochastic indicator stays within these levels for a long time it indicates strong upward Forex trend (overbought) or strong downward Forex trend (oversold).

When the stochastic lines cross back below or above these overbought and oversold levels it is usually a good indication of an upcoming forex trend reversal.

A trader can look for further forex signals to make the over-sold or overbought levels more reliable if:

Buy Trading Signal Using Stochastic Oscillator Technical Oversold Levels

  • Before Buying, the %K & %D lines turn upward from below 5 %.
  • A reading that is floating near 5% means that bears are in control and there is selling of the currency pair. A trader should wait for the Stochastic Oscillator Technical to move back above 5% as a sign that the selling pressure is easing.

The Buy signal is confirmed when the stochastic oscillator forex indicator moves above oversold, then after a while returns to oversold but this time moves up immediately without staying at the over-bought.

Buy Trade Signal Using Stochastic Oscillator Trading Indicator Trading Indicator Over-sold Levels

Buy Trade Signal Using Stochastic Oscillator Technical Over-sold Levels

Sell Trade Signal Using Stochastic Oscillator Trading Indicator Trading Indicator Over-bought Levels

  • Before Selling, the %K & %D lines turn down from above 95%.
  • A reading that is floating above 95% means that bulls are in control and there is buying of the currency pair. A trader should wait for the Stochastic to move below 95% as a sign that the buying pressure is easing.
  • The sell trading signal is confirmed when the stochastic moves below overbought, then after a while returns to overbought but this times moves downwards immediately without staying at the over-bought.

Sell Signal Using Stochastic Oscillator Technical Overbought Levels

Sell Trade Signal Using Stochastic Oscillator Trading Indicator Trading Indicator Overbought Levels

Looking at different chart time frames when using oversold and overbought levels can also help to determine the correct entry strategy when opening a trade position.

The main theory is to trade with the forex market trend. Always double check the forex signals with the longer term stochastic indicators to confirm signals on the shorter forex chart time frame periods.

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