Indicator of Stochastics
The president of Investment Educators, George Lane, created a classic among oscillators in the late 1950s, the Stochastic indicator.
The Stochastic indicator is one of the most common among traders. Its popularity is determined by the relative ease of use and the large number of signals within the range. Stochastic refers to oscillators. It works most qualitatively within the flute.
This Forex algorithm shows the ratio of the closing price at the moment to the minimums/maximums for the specified period.
Characteristics of the indicator of Stochastics
Time scale: any
Basic assets: any
Description of the indicator of Stochastics
At the heart of this algorithm is one of the market properties that in an uptrend closing prices are closer to highs and in a downtrend closer to lows.
If the extreme closing price is closer to the trade range highs, the Forex indicator will be close to 100%. If the last price value is closer to the lows within the price range, the indicator will be close to 0%.
Similar to the relative strength index, the Stochastic indicator has areas of overbought and resale. These are usually indicated by levels 80 and 20. If the price is in one of them, the trader can prepare to open the deal in the opposite direction from the current trend (it is important to remember that the trend should develop within the framework of the general fleet movement).
The Stochastic indicator is two curves that move between 0 and 100. From time to time they intersect with each other, which gives certain signals for working with the base asset. The algorithm is built in a separate window from the price.
Stochastic Indicator Trading Signals
This technical analysis tool evaluates the market speed based on the maximum and minimum of the price range of the previous few days and the ratio of the closing price to them.
The main tools of forex indicator are two lines: fast line% K, represented by solid line and slow% D, displayed by dashed line.
Closing price to maximum/minimum range ratio as a percentage of 0 to 100. The price range within the norm is considered to be the boundaries of 20 - 80. Going abroad 80 indicates the overbought of the currency pair. When the figures are below the 20 is the signal of the pair being re-sold.
The basic principle of action is that, with an upward trend, price tends to fit previous highs. Accordingly, at reduction - to the limits of lows.
The standard period for% K is a time slot for 5 days. You can define more price reversals from the faster% K line, while the% D line can identify the most significant points within a certain period.
One of the main signals of the indicator is Forex divergence, or divergence.
Divergence happens to be of two kinds: bear and bull
Bull divergence occurs when the price rises twice beyond level 20. If line% K rises above line% D, a purchase signal is generated.
Like most oscillators, Stochastika has signals that appear when leaving the overbought/resale zone. In this case, the trader can start trading in the opposite direction from the trend. When the price is in the overbought area (above 80). This means that a reversal may soon begin in the market. Binary option traders are encouraged to buy a Put contract only when the price passes the top-down 80 mark.
If the indicator curve is between 0 and 20, the underlying asset is resold. And at any moment it can come to turn up. Buying a Call contract is recommended when the indicator curve crosses the bottom-up mark 20.
The Stochastic indicator can also signal divergence. In this case, price lows or highs are not supported by indicator highs or lows. Such signals are great for trading on Forex, but we do not recommend using them to traders who work with binary options. They 'll be better suited to the Bollinger Lane indicator, for example.
The reason is that this kind of signals do not have a clear time slot to enter. That is, the trader cannot know in advance when his work will begin. As a result, given the limited duration of the contract, the binary options trader risks losing funds even with the correct direction forecast.