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 market tops means that the bulls are weak, and the bears (sellers) have over-powered the bulls very quickly. This means that the bears might push the price further down without much resistance from the bulls(buyers).

Very high, wide market tops

Wide market top mean that the bulls are very powerful much more than the bears & the ensuing shortterm trend reversal (retracement), will be very short lived. Retracement on the stochastic oscillator indicator will not even reach the oversold areas before the stochastic oscillator indicator moves back to the over-bought levels.

Market Bottoms

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

The narrow market bottom means that bears are weak in their attempt to push the price down, the bulls have gained control of the price pretty fast so the price movement upward will continue for-some time. And the upward trend direction will continue for-some time.

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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