What Is Stochastic Indicator Forex
Many analysts have an exaggerated view of its applicability.
What is stochastic indicator forex. Originally the use of the stochastic indicator was to follow the momentum of a price however its current use is to identify an overbought and oversold security. The stochastic oscillator can be dead wrong repeatedly if the currency is range trading but in a choppy wide range. Many forex traders use the stochastic in different ways but the main purpose of the indicator is to show us where the market conditions could be overbought or oversold.
Stochastic is plotted on the scale between 1 and 100. He belonged to a group of elite traders in chicago s investment arena but the invention of the stochastic oscillator was solely. Check the daily chart and make sure the stochastic indicator is below the 20 line and the k line crossed above the d line.
Forex traders prefer a slower version of this indicator because they believe the signals are more accurate. The stochastic indicator does not show oversold or overbought prices. This indicator measures momentum by comparing closing price to the.
The stochastic oscillator is a momentum indicator that is widely used in forex trading to pinpoint potential trend reversals. For slow stochastics k becomes the old d line and the new d is derived from the new k. We re day trading but having in mind the higher time frame sentiment and trend.
How to interpret stochastic indicator. The stochastics indicator is composed of two fluctuating curves the green k line and the red d signal line. The stochastic oscillator was invented by a chicago based securities trader and renowned technical analyst george c.
The stochastic oscillator is popular in forex and widely considered a must have indicator on every chart. Okay let s move on to rsi. There are also so called trigger levels that are added to the stochastic chart at 20 and 80 levels.
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