Stochastic Oscillator is one of the tools of technical analysis in forex trading. This indicator was found by George C.Lane in 1950 and is commonly used by traders. This indicator is used to help determine the best time to enter the market. This indicator is still popular today because it is easy to use and with a good understanding can make a consistent profit.
Stochastic Oscillator has two lines are lines % K and line % D. to distinguish the two usually G aris% K is generally used in blue while the% D line is used in red and represented by dotted lines.
- % K compare trading closing price Range against the latest
- % D is a signal line which is calculated by smoothing the% K
Stochastic oscillator is used to measure the level of market saturation. The advantage of using this indicator is to help the brand Open Buy and Sale .
Similarly, RSI, Stochastic oscillator also? area overbought and oversold .? This overbought zone exceeds a value of 80, and? oversold zone is less than 20.
Under conditions of overbought, you can prepare to take a position Sale , because the price movement will drop. And if the oversold conditions, you can be prepared to take the position of Open Buy , because the price movement will reverse the upward trend.
Crossover (intersection) between the% K and% D is a good signal to open Buy or Sell. sell signal? usually appears when the stochastic is in overbought zone. Conversely, a good buy signal usually appears when the stochastic is in oversold zone.
you? 2 strategies that can be used when using Stochastic oscillator, namely:
- Buy top to bottom Sales strategy is to open buy when the market conditions and the intersection line Stochastic saturated. Open a buy entry point is now under the stochastic signal line worth 20 and cut the main line from the top, so that the next line of signal will be below the line main. Although the entry point of sale is when the stochastic is worth over 80 and line signal cut the main line from the bottom, so that the next line of the signal will be above the main line .
- stochastic indicator can undergo convergent and divergent, with consequently, in the case of convergence or divergence that we could use it as a good time to enter the market. open entry point of purchase is when the graph is more modest increases while stochasticknya over the signal line intersecting the main line from the top. To open the sales entry point is when the progressively higher graph while his modesty, plus line signal that cuts the main line of the stochastic background.
So how technical analysis using Stochastic oscillator.
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