Quick Summary
Trading with Stochastic indicator involves the following signals:
Stochastic lines cross — indicates trend change.
Stochastic readings above 80 level — currency pair is overbought,
Stochastic staying above 80 level — uptrend is running strong.
Stochastic exiting 80 level downwards — expect a correction down or beginning of a downtrend.
Same for readings below 20 level — currency pair is oversold,
staying below 20 — doentrend is running strong,
exiting upwards above 20 — expect an upward correction or a beginning of an uptrend.
Details
The idea behind Stochastic indicator.The main idea behind Stochastic indicator according to its developer, George Lane, lies in the fact that rising price tends to close near its previous highs, and falling price tends to close near its previous lows.
How to interpret Stochastic indicator
Stochastic is a momentum oscillator, which consists of two lines: %K - fast line, and %D - slow line. Stochastic is plotted on the scale between 1 and 100. There are also so called "trigger levels" that are added to the Stochastic chart at 20 and 80 levels. Those lines suggest when the market is oversold or overbought once Stochastic lines pass over them.
Trading with Stochastic indicator involves the following signals:
Stochastic lines cross — indicates trend change.
Stochastic readings above 80 level — currency pair is overbought,
Stochastic staying above 80 level — uptrend is running strong.
Stochastic exiting 80 level downwards — expect a correction down or beginning of a downtrend.
Same for readings below 20 level — currency pair is oversold,
staying below 20 — doentrend is running strong,
exiting upwards above 20 — expect an upward correction or a beginning of an uptrend.
Details
The idea behind Stochastic indicator.The main idea behind Stochastic indicator according to its developer, George Lane, lies in the fact that rising price tends to close near its previous highs, and falling price tends to close near its previous lows.
How to interpret Stochastic indicator
Stochastic is a momentum oscillator, which consists of two lines: %K - fast line, and %D - slow line. Stochastic is plotted on the scale between 1 and 100. There are also so called "trigger levels" that are added to the Stochastic chart at 20 and 80 levels. Those lines suggest when the market is oversold or overbought once Stochastic lines pass over them.
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