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.
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.