The stochastic oscillator strategy is a market trading strategy that is used to know the volume of the trading with the help of market close price with a specified time spam. This os also used to know the different trading decisions. The oscillator is basically is an object or can be and type of data that can be represent in any form that moves between the two points. It can be move in forward direction and backward direction in the chart.
The stochastic oscillator is also used to determine the technical analysis of the market. This strategy use two lines. These lines tells the that when the close price will come near to a specified time period and these line signals are also used to know that when the trend will overbuy and oversold. These signals tell when the trend will be at low level and when the trend will be at high level. This all information can be only gained through the technical analysis.
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This stochastic oscillator strategy gives result with the help of two lines named as ℅k and ℅D. These lines normally represents the indicator. When these two lines crosses each other then a signal is produced. Then the strength of this signal shows the result.
If the signal is moved downword and the crossed line also moves downword then it indicates that closing prices are near to the current prices in a low level. And If the signal is moved upword and the crossed line also moves upword then it indicates that closing prices are near to the current prices in a high level.
This strategy also works on the base that if the quantity of the buyers will be in large amount then it means that the trend is going on higher level and if the quantity of the sellers is in large amount then the trend is coming towards low level that there is no change in the trend. These signals appear on the base of the current price.
The stochastic oscillator strategy gives a formula for knowing the closing price rates. It takes results of the fourteen time periods,closing price results, past trading sessions, current market rate, market overbought and oversold values and some other factors.
%K = 100(C – L14)/(H14 – L14)
C = the most recent closing price
L14 = the low of the 14 previous trading sessions
H14 = the highest price traded during the same 14-day period
%K= the current market rate for the currency pair
%D = 3-period moving average of %K
Oversold and overbought conditions
The stochastic oscillator strategy is also used for knowing the market overbought and oversold conditions. It tells the overbought and oversold conditions through the range values. There are 0 to 100 ranges that are defined in the chart. There some specific ranges are used for both the overbought and oversold conditions.
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When the range is above the the 80 then this condition is called as over bought condition.
When the range is below the 20 then this condition is called as over sold condition.
If both lines %k and %D crosses each other then this process show the strong signals and that tell that there is a strong trend change.
Before trading with the stochastic oscillator strategy the traders should keep in mind that is this strategy is compatible with all the currency pairs?
So the answer is neutral because with some currency pairs it gives accurate result but with some it confused by itself.
The currency price is also used to determine the nearest closing values. The currency pairs for buil in operations give a good result and the trade is for long term but gor the idea pairs this is little problematic thing because at some point it shows negative results.
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This show the result in the form lf the signals. If the signal cross down then the sign give false result and tells that the time period has been out. If the signal cross up then the sign give accurate result and tells that the time has been expanded.
Combination with others
If there is a combination of this stochastic oscillator strategy with other strategy techniques then the features, operations of this strategy may be increased. This can also give more clear entering and closing results.
A name of Day trading
When we talk about the stochastic Oscillator strategy then mostly it is named as day trading. The day traders can use this strategy for thier market trading. This strategy is mostly combined with the two common strategies such as price action day trading and simple price action strategy.
But here is also a difference between these strategies. The unique difference between these is the technical analysis. In simple words in the stochastic oscillator strategy the main role of the technical analysis. The traders mostly used it for technical analysis because it gives accurate result as compare to other strategies.
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Trading with volume
This strategy also tells the total volume of the assets that are used in the market trading. This indicator is used to calculate that how much the total financial assets are used for trading purpose at a specified period of time. In market stock exchang e the volumes are measured in the form that how many market shares are used for trading. This all calculation is done on the base of the future contracts and pervious and current contracts for market trading.
The stochastic oscillator strategy plays very important role in the technical analysis of the market. This indicates that if the volume is increasing then the market has a strong change in the trend. That’s means that the market price is increasing. This type of strategies are the leading strategies that are used for identifying the market trend and trend direction. This is the most famous and old indicator for market trading.
Weak and strong trend
The stochastic oscillator strategy also tells the power of the trend. This tells that how much the maket trend is high and low. Here high shows strong trend and low shows weak trend.