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The Stochastic Oscillator was developed by George Lane. It is an indicator that allows future technical prices to be forecast will of occur in close proximity to previous closing prices.
As in the RSI indicator, future prices are estimated by, interpreting levels from 0 to 100.
Two lines appear on the chart as 20 and 80. These lines are overbought and oversold territories. Pricing in this range is shown using some lines on the graph. The first is the% K line and the second is the% D line.
%K = 100(C – L5)/(H5 – L5)
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As in the RSI indicator, future prices are estimated by, interpreting levels from 0 to 100.
Click here to open an account and start forex trading immediately.
Features of the Stochastic Oscillator
Two lines appear on the chart as 20 and 80. These lines are overbought and oversold territories. Pricing in this range is shown using some lines on the graph. The first is the% K line and the second is the% D line.
- % K line; The main curve is a slowed% K curve.. It uses a% K curve, which is slowed by a curve.
- % D line; Shown in dashed lines. It is more commonly referred to as a signal line.
- On MT4 platform, % K time interval has select as 5, deceleration 3,% D interval 3 as ready.
%K = 100(C – L5)/(H5 – L5)
- C = the most recent closing price
- L5 = the low of the 5 previous trading sessions
- H5 = the highest price traded during the same 5-day period
- %K = the current market rate for the currency pair
- %D = 3-period moving average of %K
Interpretation of the Stochastic Oscillator;
The closing price for the last day indicates that prices will rise if the highest value in the last 5 days is nearer.In the opposite case, prices will decrease.
It can be seen that over the 80 values that are tracked within the specified time interval, it can be returned to Sales due to excessive purchases, while the value below 20 can return to Buying due to over-sales.
The incompatibilities on the price and graphics again have the same signal characteristics as on the RSI. For example, if the chart are rising while the prices are declining, it is meaning of prices will move in the opposite direction of the trend.
Since it will generate a large number of signals at the specified time interval and does not have a positive effect on the horizontal market, it is beneficial to follow the indicator for a while and determine the best time interval according to ourselves.
One of the best indicators is the Stochastic Oscillator, but a single indicator should not be adhered to when performing technical analysis in all markets. A final decision should be made using a few indicators.Of course, fundamental analysis techniques also need to be considered.
It can be seen that over the 80 values that are tracked within the specified time interval, it can be returned to Sales due to excessive purchases, while the value below 20 can return to Buying due to over-sales.
The incompatibilities on the price and graphics again have the same signal characteristics as on the RSI. For example, if the chart are rising while the prices are declining, it is meaning of prices will move in the opposite direction of the trend.
Since it will generate a large number of signals at the specified time interval and does not have a positive effect on the horizontal market, it is beneficial to follow the indicator for a while and determine the best time interval according to ourselves.
One of the best indicators is the Stochastic Oscillator, but a single indicator should not be adhered to when performing technical analysis in all markets. A final decision should be made using a few indicators.Of course, fundamental analysis techniques also need to be considered.
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