The Stochastic indicator is an oscillator used by traders to trace the change in asset prices.
It uses support and resistance levels to give trading signals.
When activated, the Stochastic forms below the trading chart – repeatedly crossing the boundaries at level 20 and 80.
When it crosses level 80, that’s a signal for an overly high asset price. Similarly, the stochastic crossing level 20 is a signal for an overly low price.
How it works.
The first line (%K) shows the current closing price for the selected price range.
The second (%D) is the simple moving average, which is calculated on the basis of the first line (%K).
Activating the stochastic oscillator in olymp Trade.
Login to your Olymp Trade account if you are already registered.
Or register here if you don’t have an account.
- Locate and click on the indicator button in Olymp Trade.
- Scroll to find the Stochastic oscillator in the list of indicators.
- Now click on it to activate.
Do not change anything on the indicator. Leave it as it is with the standard periods at 14, 3 and 3.
How to Pick Trading Signals with the Stochastic.
The stochastic generates two signals. Overbought and oversold.
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Overbought signals signify the likelihood of an upward trend reversal.
As a trader, you can open a down-trade if you see the oscillator cross the 80 level.
On the flip side, if the oscillator’s lines have dropped below 20, the asset is oversold.
Oversold is when an asset’s price falls too quickly. After that it usually starts to rise.
Just like when an asset is overbought, when it is oversold, the trend usually reverses and the asset’s value increases.
When the Stochastic lines cross 20 upwards from below, it likely signals a rise.
Is Stochastic Indicator the Best tool for Trading on Mondays?
Mondays are just as volatile as Wednesdays and Fridays.
After a long weekend of relaxation, traders come back to the market with new psychologies, new ideas of money management and a vigor to make more money trading.
To keep at par with other prepared traders, use the stochastic oscillator or combine it with other indicators to be sure of trends.
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