Analysis of the Stochastic Indicator

A lot of Indices 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 market price stays overbought or over-sold is a crucial and important factor when analyzing the strength of the market trends.

Market Tops

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

Narrow market tops means that the bulls are weak, and that the Stock Index bears have over-powered the Indices bulls very quickly. This means that the Indices bears might push the price further downward without much resistance from the Indices bulls.

Very high, wide market tops

Wide market tops mean that the Stock Index bulls(buyers) are very powerful a lot more than Indices bears and the ensuing short-term trend reversal (retracement), will be very short lived. The retracement on the stochastic oscillator indicator will not even reach the oversold levels 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 Indices bears are weak in their attempt to push the price down, Indices bulls have gained control of the price pretty fast so the price movement upward will continue for a while. And the upwards trend direction will continue for-some time.

Very wide, deep market bottoms

A wide market bottom is a sign that the Indices bears are very strong & the Indices sellers are in control of the price, therefore any retracement upward will not stay for long.

Learn More Guides & Tutorials:

• Placing Fib Lines on MetaTrader 4 Platform
• How Can I Calculate Profit in FX Trade for Standard Account?
• ROC, Rate of Change XAU USD Indicator Analysis in Gold
• How Stochastic Gold Oscillator Works in Trending XAUUSD Markets, XAUUSD Range Markets
• How to Register XAU/USD Real Account Explained