Stochastic Oscillator

 

A stochastic oscillator is a momentum indicator.

Trading Strategy:

• recognise the trend:
• In a trendy market only open position in the direction of trend.
• In a range market you can use both buy and sell signals.
• Upper band and lower band indicating different things in different market conditions:
• In a trendy market upper and lower bands show the momentum in the market for example in an uptrend if the indicator is above 80 it means that buyers have the momentum.
• In a range market, however upper and lower bands showing the overbought and over-sold areas. So, we may go long if we see oversold in a range market and go short if we see a over-bought situation. 
• Divergence is another important strategy to adopt when using stochastic indicator as a divergence may indicate a trend reversal.