Hi again

Today want to pass in Stochastic indicator.

This is a momentum indicator which compares the closing price of an asset to a range of its price during a predefined period of time. But short story, is a perfect indicator to understand if an asset is overbought or oversold, which can mean a reversion on the price trend.

you have to lines that bounce between 0 and 100, the %K, which is the fast stoch indicator and the %D, the slow stoch indicator.

How can you use it for trading? follow these simples rules:

If >80, is overbought.

If <20, is oversold.

Buy signal when goes down under 20 and crosses up again the 20, also when %D crosses %K on oversold situation

Sell signal when goes higher 80 and crosses down again the 80, also when %K crosses %D on overbought situation

Also you can use it to spot divergencies vs price.

These rules shouldn't be followed blindly, important to confirm with price action and other indicators

Well, that's it for now, hope you enjoyed and follow me

Disclaimer: all the information is purely my personal interpretation on the TA concepts.

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