The main idea behind the Stochastic indicator according to its developer, George Lane, lies in the fact that rising price tends to close near their previous highs, and falling price tends to close near their previous lows. Stochastic is a momentum oscillator, which consists of two lines: %K - fast line, and %D – slow line and it is plotted on a scale between 1 and 100.
Trading with the Stochastic indicator
- Stochastic lines cross — indicates the trend change.
- Stochastic readings above up level — currency pair is overbought,
- Stochastic staying above up level — uptrend is running strong.
- Stochastic exiting up level downwards — expect a correction down or beginning of a downtrend.
Same for readings below the down level — currency pair is oversold, staying below the downtrend is running strong, exiting upwards above down — expect an upward correction or a beginning of an uptrend.
How to interpret the Stochastic indicator
There are also so-called "trigger levels" that are added to the Stochastic chart at up and down levels. Those lines suggest when the market is oversold or overbought once Stochastic lines pass over them.
How to trade with Stochastic indicator
Stochastic lines crossovers that happen above the up level and below the down level are treated as the strongest signals, compare to crossovers outside those levels. Traders may choose the sensitivity of their Stochastics. The smaller the Stochastic parameters, the faster it will react to market changes, and the more crossovers will be shown.
Like all indicators created from Starfield, all these descriptions and tips are strongly coded so you need just to read the message from the right side of the indicator to understand the market conditions.
Sensitive Stochastic (for example 5, 3, 3) is useful for observing rapidly changing market trends. But because it is too choppy it should be traded in combination with other indicators to filter out Stochastic signals.
Telegram Alerts Configuration
When there is a trade signal you can get a free instant telegram message.
Install the Telegram App on your mobile phone or PC and receive free instant messages, you no longer need to pay using an SMS service.
Conditions for the Alert Signals
The following conditions must be true to send a buy signal alert, the reverse applies to sell signals:
- Trend: Bullish
- Signal: Buy.
This indicator provides two different types of signals, one to tell you the direction of the trend and the other is when to enter a trade if both the trend and signal show bullish or bearish then this is not the optimal time to submit an order, wait until the signal to show buy or sell as shown in the example above.
How To Install & Remove
First, make sure you have the cTrader trading platform installed and then simply unzip the file and double-click on it to automatically install it onto the platform.
If you have any questions, please first search our product help forum for the answer, if you cannot find it, post a new question.
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