How do I use Stochastic Oscillator to create a forex trading strategy?

Définition forex stochastique: Indicateur technique développé par Georges Lane, il appartient à la famille des oscillateurs, il met en évidence une zone de sur achat et de survente ainsi que des signaux en tendances grâce à sa courbe de signal.

I am predicting it will go through the prices by the date and time shown in the light green rectangles. Les deux courbes du stochastique sont comprises entre les valeurs 0 et This provides us a signal to buy which is in alignment with the larger trend. Les valeurs inférieures à 20 indiquent que le marché est survendu et qu'une inversion est possible.

What is a 'Stochastic Oscillator'

Définition forex stochastique: Indicateur technique développé par Georges Lane, il appartient à la famille des oscillateurs, il met en évidence une zone de sur achat et de survente ainsi que des signaux en tendances grâce à sa courbe de signal.

Lane, over the course of numerous interviews, has said that the stochastic oscillator does not follow price or volume or anything similar. He indicates that the oscillator follows the speed or momentum of price. Lane also reveals in interviews that, as a rule, the momentum or speed of the price of a stock changes before the price changes itself. In this way, the stochastic oscillator can be used to foreshadow reversals when the indicator reveals bullish or bearish divergences.

This signal is the first, and arguably the most important, trading signal Lane identified. Lane also expressed the important role the stochastic oscillator can play in identifying overbought and oversold levels, because it is range bound.

This range — from 0 to — will remain constant, no matter how quickly or slowly a security advances or declines. Considering the most traditional settings for the oscillator, 20 is typically considered the oversold threshold and 80 is considered the overbought threshold.

However, the levels are adjustable to fit security characteristics and analytical needs. Readings above 80 indicate a security is trading near the top of its high-low range; readings below 20 indicate the security is trading near the bottom of its high-low range.

An oscillator is a technical analysis tool that is banded between Signal lines are used in technical indicators, especially oscillators, Learn how the stochastic oscillator indicator is sensitive to price, and discover technical indicators traders use to complement it such as the RSI and MACD. Stochastic and MACD oscillators can help isolate greater opportunities in range-bound markets.

In a chart displaying a pronounced bullish trend, for example, a downward cross through the signal line indicates that the most recent closing price is closer to the lowest low of the look-back period than it has been in the previous three sessions.

After sustained upward price action, a sudden drop to the lower end of the trading range may signify that bulls are losing steam. Ranging from 0 to , the stochastic oscillator reflects overbought conditions with readings over 80 and oversold conditions with readings under Crossovers that occur in these outer ranges are considered particularly strong signals.

Many traders ignore crossover signals that do not occur at these extremes. When creating trade strategy based on the stochastic oscillator in the forex market, look for a currency pair that displays a pronounced and lengthy bullish trend.

The ideal currency pair has already spent some time in overbought territory, with price nearing a previous area of resistance. Look for waning volume as an additional indicator of bullish exhaustion. Once the stochastic oscillator crosses down through the signal line, watch for price to follow suit.

Though these combined signals are a strong indicator of impending reversal, wait for price to confirm the downturn before entry — momentum oscillators are known to throw false signals from time to time. Combining this setup with candlestick charting techniques can further enhance your strategy and provide clear entry and exit signals.

How do I use Stochastic Oscillator to create a forex trading strategy? The good news is that most technical indicators can be adjusted to be of value to a day trader. Learn about the concepts behind Tushar Chande's momentum oscillator, including some simple steps you can use to help build Learn how to identify when a market is range-bound and what some of the technical indicators are that work best for trading