What's Stochastic Oscillator? - Definition of Stochastic Oscillator
Stochastic Oscillator indicator - Stochastic Oscillator indicators is a popular indicator which can be found on the - Indicators List on this website. Stochastic Oscillator indicator is used by traders to forecast price movement depending on the chart price analysis done using this Stochastic Oscillator indicator. Traders can use the Stochastic Oscillator buy and Sell Signals explained below to determine when to open a buy or sell trade when using this Stochastic Oscillator indicator. By using Stochastic Oscillator and other fx indicators combinations traders can learn how to make decisions about market entry and market exit.
What's Stochastic Oscillator? Stochastic Oscillator Indicator
How Do You Combine Indicators with Stochastic Oscillator? - Adding Stochastic Oscillator in MT4
Which Indicator is the Best to Combine with Stochastic Oscillator?
Which is the best Stochastic Oscillator indicator combination for trading?
Most popular indicators combined with Stochastic are:
- RSI
- Moving Averages Indicator
- MACD
- Bollinger Band Indicator
- Stochastic Oscillator
- Ichimoku Kinko Hyo Indicator
- Parabolic SAR
Which is the best Stochastic Oscillator indicator combination for trading? - Stochastic Oscillator MT4 indicators
What Indicators to Combine with Stochastic Oscillator?
Get additional indicators in addition to Stochastic Oscillator indicator which will determine the trend of the market as well as others that confirm the market trend. By combining forex indicators that determine trend & others that confirm the trend & combining these indicators with Forex Stochastic Oscillator indicator a trader will come up with a Stochastic Oscillator based system that they can test using a practice demo account on the MetaTrader 4 platform.
This Stochastic Oscillator based system will also help traders to determine when there is a market reversal based on the indicators signals generated and therefore trades can know when to exit the market if they have open trade transactions.
What is Stochastic Oscillator Based Trading? Indicator based system to analyze price and provide trade signals.
What's the Best Stochastic Oscillator Strategy?
How to Choose the Best Stochastic Oscillator Strategy
For traders researching on What is the best Stochastic Oscillator strategy - the following learn forex trading tutorials will help traders on the steps required to tutorial them with coming up with the best strategy for trading forex market based on the Stochastic Oscillator indicator system.
How to Create Stochastic Strategies
- What is Stochastic Oscillator System
- Creating Stochastic Oscillator System Template
- Writing Stochastic Oscillator System Rules
- Generating Stochastic Oscillator Buy and Stochastic Oscillator Sell Signals
- Creating Stochastic Oscillator System Tips
About Stochastic Oscillator Described
Stochastic Analysis & Stochastic Signals
Developed by George C. Lane
Stochastic Oscillator is a momentum indicator - it shows the relation between the current closing price relative to the high & low range over a given number of n periods. The Oscillator uses a scale of 0-100 to plot its values.
This Oscillator is based on the theory that in an uptrend market the price closes near high of price range & in a downward trending market the price will close near the low of price range.
The Stochastic Lines are drawn as 2 lines - % K and %D.
- Fast line %K is the main
- Slow line %D is the signal
3 Types of Stochastics Oscillators: Fast, Slow and Full Stochastics
There are Three types are: fast, slow & full Stochastic. Three indicators look at a given chart period for example 14 day period, and measures how the price of today's close compares to the high & low range of time period that's being used to calculate the stochastic.
This oscillator works on the principle that:
- In an uptrend, price often tends to close at the high of candle.
- In a downtrend, price tends to close at the low of candle.
This indicator shows the momentum of the market trends, & identifies the times when a market is overbought or oversold.
Forex Analysis & Generating Signals
Most common techniques used for analysis of Stochastic Oscillators to generate signals are cross overs trading signals, divergence signals & overbought oversold levels. Following are the techniques used for generating signals
FX Cross-over Signals
Buy signal - %K line crosses above %D line (both lines heading up)
Sell signal - %K line crosses below %D line (both lines heading down)
50-level Crossover:
Buy signal - when stochastics lines cross above 50 a buy trading signal gets generated.
Sell signal - when stochastic indicator lines move below 50 a sell trade signal gets generated.
Divergence Trading
Stochastic is also used to look for divergences between this trading indicator and the price.
This is used to determine potential trend reversal signals.
Upwards/rising trend reversal - identified by a classic bearish divergence
Trend reversal - identified by a classic bearish divergence
Downwards/descending trend reversal - identified by a classic bullish divergence
Trend reversal - identified by a classic bullish divergence
Overbought/Oversold Levels on Indicator
Stochastic is mainly used to identify potential overbought & oversold conditions in price movements.
- Overbought values greater than 70 level - A sell signal occurs when the oscillator rises above 70% & then falls below this level.
Overbought - Values Greater 70
- Oversold values less than 30 level - a buy trading signal gets generated when the oscillator goes below 30% and then rises above this level.
Oversold - Values Less Than 30
Trades are generated when the Stochastic crosses these levels. However, overbought/oversold levels are prone to whip-saws especially when market is trending upwards or downward.
