Trading with Stochastic indicator involves the following signals: Yahoo forex lines cross — indicates trend change. Stochastic staying above 80 level — uptrend is running strong. Stochastic exiting 80 level downwards — expect a correction down or beginning of a downtrend.
20 — expect an upward correction or a beginning of an uptrend. The main idea behind Stochastic indicator according to its developer, George Lane, lies in the fact that rising price tends to close near its previous highs, and falling price tends to close near its previous lows. Stochastic is plotted on the scale between 1 and 100. There are also so called “trigger levels” that are added to the Stochastic chart at 20 and 80 levels. Those lines suggest when the market is oversold or overbought once Stochastic lines pass over them.
Let’s look at three methods of trading with Stochastic indicator. This is the simplest and common method of reading signals from Stochastic lines as they cross each other. D line downwards traders open Sell orders. D line upwards traders open Buy orders. Traders may choose sensitivity of their Stochastics. The smaller the Stochastic parameters, the faster it will react to market changes, the more crossovers will be shown.
But because it is too choppy it should be traded in combination with other indicators to filter out Stochastic signals. Traders are looking for a divergence between Stochastic and the price itself. At times when the price is making new lows while Stochastic produces higher lows creates dissonance in the picture. Divergence between price and Stochastic readings suggest a forming weakness of a main trend and therefore its possible correction. Applying this smoothing factor allows Full Stochastic be a bit more flexible for chart analysis. Thank you for your feedback, guys! You’re also right, I should do some work RSI indicator too.
Man that was well explained in such few lines, I looked the explanation somewhere else and so far yours is short and well presented. You are a teacher that teaches what matters most to your students. After reading through this explanation all is clear. Thanks for making it so easy to understand. Yeah thanks, the explanation is shot but covers all the silient parts. I’m really glad you like it!
Thanks, I really appreciated the tutorial because it is easy to understand as you stated the data with clear explanation and formulas. Seems U got much savvy in this aspect. Couldn’t found what to say cuz of excellence, and the method of teaching never seen before, TIPTOP! I have heard that the experienced players are using double or triple Stochastic inidcators with different parameters and they are enough for them if they have learned to use them correctly. If so, how do they use?
Forex traders would pick only those signals, that go with the direction of a trend. As an example, Forex traders can use 34, 5, 5 and 5, 3, 3 Stochastics together. Great info on the Stocastic Indicator — thanks! Try focusing on 1 hour and daily charts. I’d believe that for your purposes you can use the same set of indicators, among which I would try MACD, Stochastic, then possibly also Parabolic SAR and some Moving averages. Custom indicators would also be worth your attention.
Unfortunately, I can’t help with the software question. I have any question – know You how indicators are using on this video above PLEAS? I’m not sure if I understood your question. Please feel free to ask again. In the video it night be 5, 3, 3 Stochastic – the default settings for Stochastic in MT4 platform. But sometimes both lines are so similar.
Thanks so much for your help. Up moves, Down moves and Sideways price moves. Trend indicators help defining the prevailing direction – trend – of the price moves by smoothing price data over a certain period of time. In simple words, Trend indicators allow to visualize Trends in the market.
May I please ask about trend lines. Are they also belong to trend indicators. If yes, why you don’t mention it here. Trend lines are not exactly indicators, but rather technical tools. Trend lines are graphical analytical tools, applied by traders without any mathematical formula behind them. However, you’ll be right naming trend lines as indicators if we start speaking about automated trading systems, where even trend lines are drawn by a software.
Here we’ve covered Forex trend lines. I will be very happy if you can help me with it. I don’t have any particular e-books on these subjects, unfortunately. I think browsing through the maze of Forex websites can bring some results. I’d like to know if there is an indicator out, so that it may count bars from a low or high point and project out from that low or high eg. 30 60 90 bars and so on.