Stochastics The Stochastic indicator or by name in English, was developed by George Lane in the early 1960’s. Its concept is based on the assumption that when the price increases it tends to be closer to the high point of the recent price range. By contrast, when the price falls it tends to be closer to the recent low price range.
How does Stochastic indicator
Stochastic is a momentum oscillator that ranges between 0 and 100 and consists of two lines:
% K – is the main line and is usually presented as a compact line
% D – Is simply a moving average of% K and is usually presented as a dotted line.
There are three types of stochastic: the slow stochastic, rapid and full. The slow stochastic is simply a smoothed version of the stochastic fast and full stochastic are even smoother version of the slow stochastic.
How Tranzas with the stochastic indicator
There are three methods for stochastic Tranzas Forex indicators:
1. Overbought / oversold:
When one of the stochastic lines cross the levels of 20% or 80% means that prices are over-par over-bought or sold.
The strategy in its simplest form, is to buy when the stochastic falls below the 20% level and then rises above it again.
Also, it generates a sell signal when the stochastic rises above the level of 80% and then falls below it.
2. Crosses:
Can be given similar treatment lines% K and% D of the stochastic indicator, those two moving averages indicators one of which is fast and the other is slow and look for intersections of these two.
You must buy when% K crosses below upwards% D:
Or should sell when% K crosses up down% D:
Note: The crossing of the stochastic line often provides false signals, which need to be filtered with the other (s) indicator (s).
3. Divergences:
Divergences between the stochastic lines and the price is a good sign for the purchase or sale. For example, if prices are making “new high” and the stochastic is trending lower, it could be a warning sign of weakness in the market.
