Stochastics ( Slow and Fast) are amongst the most popular technical indicators used in Forex Trading. To use them correctly, we must understand their nature. In this article I will mainly discuss about this Stochastics and how to trade using them.
The stochastic oscillator is a momentum indicator to compare the closing price of a commodity to its price range over a given time span. The most important key about this indicator is the fact that the prices are likely to close near their past highs in bull markets, and near their lows in bear markets. Transaction (enter/exit) signals can be spotted when the stochastic oscillator crosses its moving average. This explains all the decisions relevant to this indicator, even when we use this indicator in combination with others. In currencies we mainly use the Stochastic Oscillator on the 15 and 60 minute charts.
Normally, traders use two stochastic oscillator indicators to assess future variations in prices.
The two Stochastics indicator lines:
%K Is the main line and is usually displayed as a solid line
%D Is simply a moving average of the %K and is usually displayed as a dotted...
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