Using stochastic to trade the financial market

Using stochastic to trade the financial market


Stochastic is a crossover oscillator indicator created by Dr.George Lane.Since stochastic is a crossover oscillator indicator, it therefore ranges between 0 to 100 with two crossover lines, the blue line which is the stochastic line and the red line which is the signal line.

Therefore, since stochastic is a crossover oscillator indicator, it is therefore based on overbought and oversold market condition when the two line crosses over.Therefore, the sell or buy signal will take place when there is crossover at below 20 or at above 80.                                      Overbought market crossover   For overbought market, the stochastic oscillator will cross below the signal line at above 80. This will signal the trader to close any buy position and open a sell position since the market will start moving downwards. This is indicated from the candlesticks chart below;   overbought stochastic.png   From the candle sticks chart above, there are 3 points. Point A which is blue in color is the stochastic line while point B which is red line is the signal line. Point C is the crossover point. At point C, the stochastic oscillator has crossed below the signal line at above 80 thus an indication of an overbought market. This will signal the trader to close any buy position and open a sell position since the market is starting to move downwards as indicated from above.                                          Oversold Market Crossover For oversold market, the stochastic oscillator will cross above the signal line at below 20. This will signal the trader to close any sell position and open a buy position since the market will start moving upwards. This is indicated from the candlesticks chart below;  
oversold stochastic.png   From the candlesticks chart above, there are 3 points. Point A which is blue in color is the stochastic line while point B which is red line is the signal line. Point C is the crossover point. At point C, the stochastic oscillator has crossed above the signal line at below 20 thus an indication of an oversold market. This will signal the trader to close any sell position and open a buy position since the market is starting to move upwards as indicated from above.     Recommendation : If you are a day trader just use 1 min, 5 min, 15 min and 30 min timeframe while if you are a swing trader just use 1 hour and above timeframe if you want stochastic indicator to work well for you


quintomudigo
quintomudigo

Trader, Blockchain Technologist and Contentpreneur. Also founder and CEO @ Teacher Forex School.


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