How to use the stochastic indicator in forex trading

How to use the stochastic indicator in forex trading

Stochastic Oscillator in forex is a momentum indicator that compares the most recent closing price relative to the previous price range over a certain period of time. The stochastic indicators also indicates overbought and oversold conditions on a scale of 0 – %. It t herefore helps traders to know when the trend is coming to an blogger.comted Reading Time: 5 mins 17/09/ · The Stochastic is used in a variety of ways by forex traders, but the fundamental objective of the indicator is to show us where the market may be overbought or oversold. Remember that Stochastic can stay above 80 or below 20 for extended periods of time, so just because the indicator shows “overbought” doesn’t mean you should sell blindly! 10/10/ · Stochastics, like MACD Indicator, are also momentum oscillators, reflecting the strength of market movement, which is helpful for Forex trading.. Stochastics are one of the most important technical indicators for Forex trading.. 3 Ways To Use Stochastic Indicator For Forex Trading. Three fundamental ways to use stochastics for FOREX trading

How To Use The Stochastic Indicator Step By Step

AnalysisindicatorRolftipsTrading StrategyTrading Tool. IndicatorsPrice ActionTechnical AnalysisTradeciety Academy. Or, even worse, many traders use their indicators in a wrong way because they have never taken the time to look into it. As we will see shortly, the indicator analyses price movements and tells us how fast and how strong the price moves.

If you visualize a rocket going up in the air — before it can turn down, it must slow down. Momentum always changes direction before price. I am always a fan of going into how an indicator analyzes price and without getting too deep into the mathematics, this is how the indicator analyzes price:.

This means that the Stochastic indicator takes the absolute high and the absolute low of that period and compares it to the closing price. We will see how this works with the following two examples and I have chosen a 5 period Stochastic which means that the Stochastic only looks at the last 5 candlesticks. When your Stochastic is at a high value, it means that price closed near the top of the range over a certain time period or number of price candles.

You can see, the high Stochastic shows us that price was very strong over the 5 candle period and that the recent candles are pushing higher. Conversely, a low Stochastic value indicates that the momentum to the downside is strong.

The misinterpretation of overbought and oversold is one of biggest problems and faults in trading. The Stochastic indicator does not show oversold or overbought prices. It shows momentum. Generally, traders would say that a Stochastic over 80 means that the price is overbought and when the Stochastic is below 20, the price is considered oversold. And what traders then mean is that an oversold market has a high chance of going down and vice versa.

This is wrong and very dangerous! As we have seen above, when the Stochastic is above 80 it means that the trend is strong and not, that it is overbought and likely to reverse. A high Stochastic means that the price is able to close near the top and it keeps pushing higher.

A trend where the Stochastic stays above 80 for a long time signals that momentum is high and not that you should get ready to short the market, how to use the stochastic indicator in forex trading. The image below shows the behavior of the Stochastic within a long uptrend and a downtrend.

A high Stochastic value shows that the trend has strong momentum and NOT that it is overbought. Finally, how to use the stochastic indicator in forex trading, I want to provide the most common signals and ways how traders are using the Stochastic indicator:.

As with any other trading concept or tool, you should not use the Stochastic indicator by itself. To receive meaningful signals and improve the quality of your trades, you can combine the Stochastic indicator with those 3 tools:. You might not need the Stochastic indicator when you are able to read the momentum of your charts by looking at the candles, but if the Stochastic is the tool of your choice, it certainly does not hurt to have it on your charts this goes without a judgment whether the Stochastic is useful or not.

More importantly, this article is meant to make you realize how little you might know about the tools you use for your trading. Additionally, there is a lot of wrong knowledge being shared among traders and even widely used tools such as the Stochastic indicator is often misinterpreted by the majority of traders. Do not blindly believe what other people tell you, do your own research and build your trading knowledge. This information is excellent quality, it is the first time I have really understood what stochastic is telling me.

Many thanks. Great article keep it up. Q: You mentioned when price is how to use the stochastic indicator in forex trading MA, it is Long not Short. There are many MA, which one are you referring to? So grateful to find these posts I open my eyes everytime I read a post.

Thanks good bless to your life. This isa game changer. This is priceless!!! Thank you Sir!! Hi, nice article, but I how to use the stochastic indicator in forex trading have some doubts, how to use the stochastic indicator in forex trading, the formula to high and low is the same?

Usually we see two lines, K and D, and they receive different parameters, in trandingview. com they are by default 13 and 4… What do they mean? Sorry if this is such a noob question, I am just starting trading. Thanks a lot. Excellent explanation Bro. I have never seen such a wonderful and completely logical explanation of any indicator. Your research shown different dimension of technical analysis.

Thank you so much for a such a helpful post. For the first time I now understand what the stochastic is telling me and how to properly use it.

Thank you so, so much! Greetings from South Africa. what a explanation ,just describe in details, which is a eye opener for every new trader. today i got to knowhow to used stochastic oscillator. Thanks you a million for giving us such valuable lesson. every trade set up posted in your blog is a cornerstone for newbie. so please keep updating new trade set up from which we can learn to become a succesful trader.

This article and all of them really are absolute gold! People really do need to dig more and learn what their indicators are for and how they work before using them. They have helped me immensely with my trading. Thank you so much Mentor Rolf. Such a blessing and your labor to give us guidance how to use these indicators is indeed a Diamond-digged!

God bless you and prayers of good health to you and your family! The devil is always in the details. What a powerful detailed explanation of stochastic indicator. Please Do you have any write up on multiple time frame trading using stochastic indicators. What moving average would be appropriate for day trading? Also, what are the ideal settings for the stochastic? I have 5,3,3 as How to use the stochastic indicator in forex trading day trade. Please advise. Thank You Sir, its very informative info.

would like to learn more from you. Very nicely described and correlated with other tools. Very informative and off course in simple words.

wow great knowledge sharing …. very simplified just really awesome explanation … thanks alot …. Thank you very much for taking the time to share such valuable knowledge! We really appreciate all your hard work and how much time you invested in these blogs!

Congratulations friend, your blog is undoubtedly the best in technical terms and mindsets. Thank you and I await you in Brazil. Thanks Rudolf. Precise explanation on how to calculate stochastic indicator and how to use it. God bless You. This is incredible i must say how to use the stochastic indicator in forex trading. Thanks for the wonderful post on stochastic indicator… stay blessed. Thanks so much Rudolf. As a newbie from Nigeria I now know what and how to use stochastic oscillator.

This is the best article in Stochastics ever. and i have read a lot of thema question here: which settings you recommend for this indicator? thanks — Danke sche! I want to know how to make use of the indicator especially when there is a divergent candle stick confusing me very well. Candlesticks 1 Day? or any other? Please let us know. In your chart I can see a stochastic indicator has two lines.

But when I use it I find only single line. How can I make my stochastic look with two lines as yours? Life saver! You, Sir, are a real trader.

My SUPER SIMPLE Stochastic Indicator Forex Strategy! (Full Strategy Guide)

, time: 23:23

How to Use The Stochastic Oscillator Indicator in Your Forex Trading Strategy? - AndyW

Stochastic Oscillator in forex is a momentum indicator that compares the most recent closing price relative to the previous price range over a certain period of time. The stochastic indicators also indicates overbought and oversold conditions on a scale of 0 – %. It t herefore helps traders to know when the trend is coming to an blogger.comted Reading Time: 5 mins 17/09/ · The Stochastic is used in a variety of ways by forex traders, but the fundamental objective of the indicator is to show us where the market may be overbought or oversold. Remember that Stochastic can stay above 80 or below 20 for extended periods of time, so just because the indicator shows “overbought” doesn’t mean you should sell blindly! 09/07/ · As with any other trading concept or tool, you should not use the Stochastic indicator by itself. To receive meaningful signals and improve the quality of your trades, you can combine the Stochastic indicator with those 3 tools: Moving averages: Moving averages can be a great addition here and they act as filters for your signals. Always trade in the direction of your moving averages and as long as price is above the moving average, Estimated Reading Time: 7 mins