Learning Stochastic Oscillator For Forex Trading Analysis

Learning Forex: Stochastic oscillator (more commonly referred to as stochastic course) is one indicator that can also help you to find the right moment to determine the entry point. This indicator was first developed by a physician who also is a stock trader and technical analyst named George Lane in the 1950s.Stochastic is also one of the indicators that are popular among traders because it is easy to understand and use. In addition, the method is good, this indicator can also generate profit with a fairly good consistency. That is why this indicator is still popular today.This indicator has two lines: the% K line and the% D line. For the sake of convenience to distinguish them, usually both given a different color. Color used is light blue color for the% K and% D in red to. Additionally,% D is usually displayed as a dotted line. Of course, the colors that later you can change according to taste, which is important later on you can tell which is the% K and% D which ones.

Another component is overbought and oversold area. In stochastic, this overbought area located on level 80, while the oversold area located below level 20.

At the beginning it has been said that the stochastic can help you find a good moment of entry. Which became the signal is a crossover (crossover / intersection) between the% K and% D. Good sell signal often arise when stochastic has been in overbought area. Instead, buy a good signal often arise when stochastic has been in oversold area.

Stochastic usually works well when the market is in a state sideway. Therefore, you should be careful to translate signals from the stochastic buy or sell when the markets are trending.

Then, when the useless stochastic trending market then?

Not entirely so, because there are still ways to use stochastic although the market is trending.

When the market is trending, you can still use the stochastic as a reference. Condition is the signal that appears to be in line with the ongoing trend. So when the downtrend, sought is a sell signal. Conversely when the uptrend, you're looking for is a buy signal.

Well, the wise advice is: buy the one you are on the uptrend and sell the one you have at the time of the downtrend.

Finding divergence with the stochastic

In addition to providing information overbought and oversold, stochastic can also be used to look for bullish divergence and bearish divergence. The trick is similar to looking for patterns of divergence on the CCI.

The above is an example of a bullish divergence obtained by using stochastic on the graph the AUD / USD. Bullish divergence will receive a confirmation when stochastic rose above the 50 level.

 The above is an example of bearish divergence seen on the chart AUD / USD by using stochastic. Confirmation bearish divergence is when the stochastic down past level 50.
How, simple enough right? All you need to do now is extending the exercise by observing stochastic.