What Are Stochastic Oscillators

[moonchild]

Stochastic oscillators are used in Forex Trading to determine the levels of the price, to activate your Stochastic levels oscillators you have to go to the indicator window and add the Stochastic oscillator, but to be able to use it effectively you need to add a relative strength index first, and then add a Stochastic oscillator.

By using a Stochastic oscillator you should notice when the price hovers around 80-100 that means the trend is very strong and when you enter the trade you'll be able to milk the trade and then when it comes down to 50-70 you should get out of the trade because that shows you the price is exhausted.

And when a Stochastic levels is around 0-30 you can then enter for a sell and that shows that the trend is very strong downtrend.

Stochastic oscillator shows you the strength of a trend and how you can take advantage of it, but also you have to confirm with other indicators whether the trend is really strong, because sometimes there might be a fake out during a consolidation.

Stochastic oscillator is a good indicator that shows you how strong a tend is and you can also use it as a confluence.

 

[Jasz]

Stochastic oscillators are a type of technical indicator used in the analysis of financial markets. They are used to identify when an asset is overbought or oversold. Stochastic oscillators can also be used to foretell potential price reversals, which are called divergences.

A stochastic oscillator is a momentum indicator that uses support and resistance levels. A stochastic oscillator is based on a simple moving average, typically of closing prices. For example, if you have a five-day simple moving average for closing prices, the current closing price would be added to the total and the oldest day's price would be subtracted from the total. This number is then divided by the number of time periods (in this case, five) to get the smoothed-out moving average value — or simply moving average.

This value is then compared with another moving average based on a different time period—for example, 10 days—to get a percentage value that can be interpreted as an overbought or oversold indicator.

 

[Ivo Zetticci]

Psychology amendment takes time and you have to stay with the market for a long time to cope up with it. And try to understand the market trend. To develop traders’ ability, FXOpulence provides a free educational program.