Learning To Use The Stochastic Oscillator Can Make You Rich Shocker
The Stochastic oscillator is meant to girate between 100 and 0. A very low level means emotions have caused people to sell in panic. A very high level means emotions have caused people to become too greedy.
When the Stochastic oscillator is low, look to capitalize on peoples fears by buying. When the Stochastic oscillator is high, look to capitalize on peoples greed by selling. Buying when the Stochastic is low is emotionally challenging because you will be afraid to buy the terrible looking chart. Conversely, selling when the Stochastic is high is emotionally challenging because the market will look great and you'll feel greedy, like you could make even more money.
Newbie traders use indicators by themselves. Don't do this. Use the Stochastic indicator with other technical indicators. Keep in mind that when a powerful uptrend begins, the Stochastic indicator quickly becomes overbought and begins showing premature sell signals. In a sudden panic sell off, the Stochastic indicator quickly becomes oversold and begins showing premature buy signals. Therefore, this indicator only works if you use it with other trend-following indicators.
What you need to do is to enter a position when the Stochastic indicator is at an extreme. If you try and wait until the Stochastic indicator turns, you'll miss too much of the move. Think of the extremes of the Stochastic as telling you how much emotion is in the market. The more the emotion, the better you can take money away from other traders.
If the Stochastic has a bullish divergence from the price, go long. If it has a bearish divergence from the price, go short. Bullish and bearish divergences are just a short way of saying that the Stochastic moves in the opposite direction as the price of the stock.
Perhaps the most helpful use of the Stochastic is in that it tells you when you should NOT buy. Do not buy when the Stochastic is high. Do not short when the it is low. Moving averages are better than Stochastics at spotting trends, the MACD is better at spotting reversals. But the Stochastic is the king at telling you when you should not trade. - 23305
When the Stochastic oscillator is low, look to capitalize on peoples fears by buying. When the Stochastic oscillator is high, look to capitalize on peoples greed by selling. Buying when the Stochastic is low is emotionally challenging because you will be afraid to buy the terrible looking chart. Conversely, selling when the Stochastic is high is emotionally challenging because the market will look great and you'll feel greedy, like you could make even more money.
Newbie traders use indicators by themselves. Don't do this. Use the Stochastic indicator with other technical indicators. Keep in mind that when a powerful uptrend begins, the Stochastic indicator quickly becomes overbought and begins showing premature sell signals. In a sudden panic sell off, the Stochastic indicator quickly becomes oversold and begins showing premature buy signals. Therefore, this indicator only works if you use it with other trend-following indicators.
What you need to do is to enter a position when the Stochastic indicator is at an extreme. If you try and wait until the Stochastic indicator turns, you'll miss too much of the move. Think of the extremes of the Stochastic as telling you how much emotion is in the market. The more the emotion, the better you can take money away from other traders.
If the Stochastic has a bullish divergence from the price, go long. If it has a bearish divergence from the price, go short. Bullish and bearish divergences are just a short way of saying that the Stochastic moves in the opposite direction as the price of the stock.
Perhaps the most helpful use of the Stochastic is in that it tells you when you should NOT buy. Do not buy when the Stochastic is high. Do not short when the it is low. Moving averages are better than Stochastics at spotting trends, the MACD is better at spotting reversals. But the Stochastic is the king at telling you when you should not trade. - 23305
About the Author:
May this article teaches you how to use the Stochastic Oscillator better and make a lot of money. For more trading tips on the Stochastic go to stochastic oscillator
posted by Mr. Forex at
1:05 AM
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