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Thread: Indicator Stochastic

  1. #1
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    Indicator Stochastic

    Brief introduction of Indicator Stochastic : The Stochastic oscillator is a momentum indicator that was developed by George C. Lane in 1950’s. Due to its simplicity in use this indicator is common among traders. Traders can use the Stochastic mainly to pinpoint trend reversals.. This indicator being a momentum indicator can be used to judge when the market is gaining or losing steam in a particular direction.


    Viewing The Stochastic oscillator on the chart
    : The Stochastic oscillator consists of two lines.

    1. The indicator itself represented in Violet
    2. A signal line reflecting the three-day simple moving average (SMA) represented in green.

    When these two lines intersect it may signify that a trend shift may be about to happen.

    Attachment 12605


    Using The Stochastic oscillator in trading
    : Basically The Stochastic oscillator can show us the following two things in our trading

    1. A trend shift or reversal
    2. Overbought or oversold positions.


    1.How does The Stochastic oscillator show us a trend reversal or trend shift
    : We have already learned that the indicator consists of two lines. The indicator itself and a signal line. When these two lines intersect each other then that denotes a trend reversal is about to happen. For instance if the prices have been moving up and the two lines intersect then that can denote a future downtrend.

    In the below image we can see that prices of USDJPY fell when the two lines intersected each other.

    Attachment 12607


    2. How does The Stochastic oscillator show us Overbought and oversold prices
    : Stochastic is a momentum oscillator which can show us overbought or oversold conditions. Ranging from 0 to 100. Above the 80 level we can consider that the prices are overbought. Below the 20 level the prices can be considered as oversold.

    Attachment 12608

    Useful tip
    : A trader would not like to follow each and every signal that is given by an indicator. Our focus is always on taking the stronger signals and leaving the weak. Regarding the Stochastic we can simply take the crossovers that happen at the extreme levels. For getting better signals of trade shift or reversal we can consider the crossover of the two lines in the overbought or oversold range that is above the 80 or below the 20 levels.


    My opinion
    : This indicator has stood the test of time and have given good signals for major currency pairs. However this Indicator has also given false signals a couple of times. Success rate is good and we can use a stop loss to cut our losses at the time of false signals.Safety is priority as there have been never a magical indicator that has always given flawless signals.


    Setting the The Stochastic indicator on our terminal
    : While using the indicator we can leave the parameter settings as it is. Under colors you can chose simply what appeals you more. I have chosen violet and green. For levels I have chosen the white style. For visualization it is "all timeframes".

    Attachment 12609

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  2. #11
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    I love this kind of individuals indicators that come with the trading platform you have to know that trading with them is not refine because you have to make sure that you always add other indicator that you get from other places to supplement the stochastic that you can easily get from the platform

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  3. #12
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    A stochastic is one of the tool you must use to trade forex with and these is the reason why, its used to have a good buy sell indication, one you can rely on , then you can also know when a trend ends or when a trend beggins these is one that would work for you right

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  4. #13
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    this indicator can be used for entry or exit positions and so the trader can use it in his strategy to know when to enter and when to exit, but this indicator can not be used for long term trading because it changes his crossover according to the price movement and this happen many times and s this give false signals many times

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  5. #14
    Trader UFX-Tunisia's Avatar
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    When I started to trade for the first time, the stochastic was the first indicator I ever used.. It worked for me a whole month
    I then learned after many consecutive losses (the hard way) that it is only great in a ranging market both ways but in a trending market it shouldn't be used in counter trend except to find an entry in the direction of the trend, all opposite signals minus one will be false positives

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  6. #15
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    I would like to clarify that I do viewpoint on Indicator Stochastic because I have found a lot of false signals sometimes and when I asked some professionals have answered the index results mainly comes more to the spin-off areas for pricesBut that does not give the correct signal and error shall be the next trend is to the upside is bearish according to the offending signal-price

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  7. #16
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    Stochastic indicator is best for newbie traders. If any trader don't trade in economical events news times. The indicator is best for me too. I am nine years experienced in Forex market. I am using this indicator from my Forex trading life. I like trade in market overbought and oversold position.

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  8. #17
    Trader YoyO_o's Avatar
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    I have checked many indicators and so many strategies but not satisfied with any one when the market have a swing or turn in any way it all kinds of indicators totally fail and strategy look fake, the only strategy succeed is your understanding of the market on the base of your knowledge.

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  9. #18
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    Thanks my mate for sharing your knowledge about stochastic indicator. Many traders are like the indicator. We can use it by manual parameter.I like using parameter is 5,3,3. It's result is good looking from 80 to 20 scale.We can find a trend line by use the parameter.

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  10. #19
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    [lang=ar]In fact, the Alastockastic index is extremely important and I used it with Bollinger Bands indicator
    It gives a signal to enter when the saturation stage, whether buying or selling
    It is an indicator gives a clear signal[/lang]

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  11. #20
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    Quote Originally Posted by azaharul View Post
    Thanks my mate for sharing your knowledge about stochastic indicator. Many traders are like the indicator. We can use it by manual parameter.I like using parameter is 5,3,3. It's result is good looking from 80 to 20 scale.We can find a trend line by use the parameter.
    You are right,stoch is a best indi when used with other tools (not necessarily) along with a proper and appropriate knowledge ,there are so many styles of stoch you can choose from but the setting you trying might be fit for you,as every trader have his own strategy so that can be different setting according to his/her system.
    regards

    stoch avergfil1-3.png

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