Trade Forex Trading

Analysis of Stochastic

A lot of trading information can be gathered from the shapes & duration of the market tops & bottoms of the stochastic oscillator indicator.

The amount and period of time that the forex currency pair stays overbought or oversold is an important factor when analyzing the momentum of the market trends.

Market Tops

Narrow market top which does not reach very high above 80 %

Narrow tops in markets signal weak bulls. Bears overpower them fast. This lets sellers push prices down with little fight from buyers.

Very high, broad market tops

When the market top is broad, bulls are much stronger than the bears. Any short-term reversal is usually brief. On the stochastic oscillator, you probably won't even see a dip into oversold territory before it bounces back up to overbought levels.

Market Bottoms

A narrow market bottom that does not reach very deep below 20 %

A narrow market bottom shows bears lack power to drive prices down. Bulls take control quickly, so prices rise and the uptrend lasts a while.

Very wide, deep market bottoms

A wide market bottoms is a sign that the bears are very strong and the sellers are in control of the price, therefore any retracement upward won't stay for long.

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