The closing price tends to close near the high in an uptrend and near the low in a downtrend. If the closing price then slips away from the high or the low, then momentum is slowing. Stochastics are most effective in broad trading ranges or slow-moving trends. Two lines are graphed, the fast oscillating %K and a moving average of %K, commonly referred to as %D.
Momentum shifts directions when these two Stochastic lines cross. Therefore, a trader takes a signal in the direction of the cross when the blue line crosses the red line. As you can see from the picture above, the short-term trends were detected by Stochastic. However, traders are always looking for ways to improve signals, so they can be strengthened. There are two ways we can filter these trades to improve the strength of signal.
Many forex traders use the Stochastic in different ways, but the main purpose of the indicator is to show us where the market conditions could be overbought or oversold. In this class we will look at 4 different strategies using fast and slow stochastics.
Look at 4 different strategies using fast and slow stochastics.
When momentum shifts directions how it is linked to Stochastic lines cross.
Stochastics are most effective in broad trading ranges or slow-moving trends
Who should attend?Beginner to Advance level.
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