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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. #21
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    Quote Originally Posted by Khimi234 View Post
    That's fantastic sir, I think you have really explained well how trader's could use this indicator in their trading. I think for scalping, divergence and convergence, trend reversal analysis this is a very good indicator. Personally I like the trend shift or reversal function of this indicator. As a trend follow I like to use CCI, Stochastic some time, they are really helpful for me.
    Yes my mate. Stochastic indicator is best for scalping and newbie traders. I am use this indicator for scalping and my stochastic indicator's parameter is manual. I am using 14,7,3 point and I found good result by use manual parameter.Actually, Stochastic indicator is best for me and I like this indicator. The indicator is really helpful for us.

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  3. #22
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    this indicator is very good and i always use it in my daily trading and helpful so the feature of that gives the best signals to entry and exit and to know overbought and oversold in forex market also you can use it with other technical indicators like RSI or MACD or Bollinger Bands

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  4. #23
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    stochastic indicator is good for trading and help the trader to get some good results but it is not suitable for long term trading because it changes his signals always and so we will find many changes during trading with it, it is lagging indicator and depending on it only during trading is a big mistake and will lead to more loses not earnings.

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  5. #24
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    [lang=ar]So Good sir , I think you have explained well how trader's could use this indicator in their trading. I think for scalping, divergence and convergence, trend reversal analysis this is a very good indicator. Personally I like the trend shift or reversal function of this indicator. As a trend follow I like to use CCI, Stochastic some time, they are really helpful for me.[/lang]

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  6. #25
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    [lang=ar]Thank you for the observation, it is a glitch of the typographically error. It is actually USDCAD, not USDJPY, and i had success with it yesterday. I will have to disagree with you on the rising signal of the USDCAD. The pair has entered a long term phase of trading pair, and for the crude oil rising, it will give the CAD a strong list against USD.[/lang]

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  7. #26
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    [lang=ar]Stochastic is a very good indicator to use in the market and i am going to share my strategy to use it ,i use it when i know there is no important news in the market then i know the market will not take any direction so the signals of the stochastic is usually powerful specially if used with strong levels[/lang]

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  8. #27
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    stochastic oscillator is a good indicator and can be used for making of good profits if the trader follows its rules, it is better to increase these setting of it than that of its original setting to get more stable signals or use two different setting to get better signals, or use it with another indicator to build a better strategy and make more profits.

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  9. #28
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    understanding of market could give trader's a very good opportunity to make money with those 80 and 20 levels. I am not using stochastic but there is no doubt in it that it could be effective if we have good understanding of using it.it is not profitable the indicator assist you in minimizing the risk of losing more money by getting out of the trade early enough and avoid major loses that can wipe your account

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  10. #29
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    trend reversal analysis this is a very good indicator. Personally I like the trend shift or reversal function of this indicator. As a trend follow I like to use CCI, Stochastic some time, they are really helpful for me it can be used as an entry signal but in the same direction of the market to make trading more safe and more profitable and less risky.

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  11. #30
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    stochastic maybe more suitable for short term trading more than long term trading because it is a lagging indicator and changes its crossover quickly so using it for long term trading will not a successful, it can be used for determination of a good trading position and so the trader can get some pips successfully and make some profits.

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