All About The Stochastic Indicator
If you are just getting into the world of forex trading, then you are probably having some difficulties figuring out where to place the best trades. The fact of the matter is that forex trading is of course not easy. It takes a lot of skill and knowledge in order to be a successful forex trader. One of the most important things that you need to know about our trading indicators. Trading indicators provide you with all of the information that you need to place the proper trades that will end up being profitable. One of the most important indicators that you need to know about is the stochastic indicator.
The stochastic indicator is also known as an oscillator, and this is an indicator that has been around for well over 7 decades at this time period this is an extremely reliable indicator that has the ability to provide you with all of the information that you need in terms of the momentum of the trend. One of the reasons why this indicator is so popular is because it is very easy to read and user-friendly, and it does also provide you with accurate trading signals.
What we’re here to do today is to take a much closer look at one of Andrews trading videos. For those of you don’t know, Andrew is an extremely proficient trader who has been in the business for a very long time period he also happens to be the mentor behind the income mentor box maybe trading Academy. This is one of the most popular and reputable trading schools in the whole world. Right now, we are going to take a look at one of Andrew’s videos about this stochastic indicated. Within this video, Andrew provides you with all of the pertinent information that you need to know about the Stochastic indicator to make profitable trades. Let’s get to it and figure out how to use the stochastic indicator to put money in your pockets.
What is the Stochastic Indicator?
First and foremost, what you need to know about this indicator is that it is a momentum indicator that was invented in the 1950s by George Lane. In simplest terms, the stochastic indicator provides you with information about the strength of a trend. This is also called an oscillator because the values that it provides you with oscillate between zero and 100.
What do you also need to know here is that the stochastic indicator is a specific type of momentum indicator that measures the relationship between the closing price of an asset and its price range over a certain period of time.
One of the reasons why it is so popular is because it’s very user friendly and easy to read, not to mention the fact that it has the ability to provide you with very accurate buy and sell signals. Keep in mind that you a certain extent, the stochastic indicator is also a trend indicator, because if they tell you about the momentum of a trend, then it does also provide you with a bit of information about the trend itself.
What it Tells You
Of course if you plan on using this indicator the right way, then you need to know what it tells you. Let’s keep in mind that once again, this indicator provides you with values within a specific range, between 0 and 100. Perhaps the most important thing for you to know here is that if this oscillator provides you with values that are over 80, then it means that the security is overbought, and if the value is below 20, then the security is oversold. What is important to note is that although this indicator does provide you with good information about the momentum of a trend, it’s not always 100% accurate, because sometimes, securities may remain oversold or overbought even if a trend continues.
However, what does stand out here is that this indicator is extremely good at finding hidden divergences, much better than other indicators. When it comes to charging the sarcastic oscillator, there are two lines that you need to worry about, with one being the real time value of the indicator itself, and the other line representing a three day moving average. When these two lines cross each other, it signals that there is a trend reversal very likely to happen in the near future.
A Small Drawback
Sure, the stochastic indicator is a great one to use, but it does have a small drawback, which is that it can sometimes produce false signals. It doesn’t always work that well in a sideways trending market, and it can sometimes result in false signals occur in. It may sometimes signal that there is a reversal on horizon when it’s not actually the case.
This is also especially the case if the market is extremely volatile period with that being said, something that you can do to combat this issue is used price trend as a filter. If the signals that you get from the stochastic indicator go in the same direction as the trend signals, then it’s probably a safe trade to make.
Stochastic Indicator Trading Tips
Before we call it a day, we do want to provide you with some of the best tips for using this stochastic indicator the right way. Do keep in mind up for the best tips, we do recommend watching the video that we have included here today.
- For the best results, you want to use low settings. The lower the settings, the more signals you will get.
- The best settings to use with this indicator of 14, 3, 3.
- If the market is in a strong trend, then you do want to use a pattern trading strategy.
The Stochastic Indicator – Final Thoughts
When all has been said and done, the bottom line here is that the stochastic indicator is absolutely one of the best momentum indicators out there. If you learn how to use it the right way, your chances of making profits on a daily basis increase drastically.
If you need help day trading, and what you need is a comprehensive education, particularly on Forex trading, then the best place to be is the Income Mentor Box Day Trading Academy. At this time, the IMB Academy is the most comprehensive, user friendly, effective, and affordable Forex trading school out there.