Trading experience gets refined when you use indicators that can help you predict future. Today you will find every trader is influenced by this technical indicator, the Stochastic oscillator helps you to predict future.
Yes, you can predict the price trend direction with this indicator.
But that can also be analyzed with other indicators, but what’s special in this?
The best part is that it works in the concept of crossover. So this is reliable, quick to judge and a great tool to verify the trend directions.
As a beginner, you can start analyzing the market with this tool as it is friendly and easy to understand.
The major indications are:
Like all other oscillating indicators like RSI, Stochastic also oscillates between two marked levels. You will find the same marked levels in RSI. The trend identification with these marked levels and crossovers becomes easy and reliable.
- Level 80: This is the overbought condition when the buyers are exhausted and sellers are going to come into the picture and will further dominate the market. This means that price is going to fall.
- Level 20: This marked level justifies the exit of sellers and time for the introduction of buyers who are going to dominate the market in subsequent sessions.
- Crossovers: This is the key element of this indicator. The principle of crossovers will help you to judge the trend formation and reversal in the market. When the line crosses above the signal line bullish trend is predicted while the line when crosses down the signal line bearish nature of market start. In the below example you can see how the bullish and bearish nature of market corresponds to the crossovers in the graphs.This is followed by short-term traders to identify the trend. Using this you can make secure entry and exit from the market.
The better you try the more you will get success. Don’t ever try to use any technical indicator directly without practice. First, you need to train your eyes to visualize the consequences and then start trading with your skills acquired.