Stochastic Oscillator is one of the most popular trading indicators that helps us to identify the trend using overbought and oversold levels. This indicator was developed by one of the most popular traders of all time George Lane.
How to add the Stochastic Indicator on the Olymp Trade?
Firstly, log in to your Olymp Trade account and set your chart to a Japanese candlestick chart as this indicator works best on the candlestick chart. Next click on the indicator button and select Stochastic from the menu.
You need to focus on the two lines %K and %D. You can change the colour and time frame of the indicator. However, This indicator works best on the default settings and can give you some good results.
What is a Stochastic Indicator?
A Stochastic Indicator is a momentum indicator that oscillates between 0 to 100. This indicator helps us to find a possible bullish or bearish trend by using the two lines %K and %D. Here, %K is a fast line whereas %D is the slow line. The moments of %K and %D intersecting each other generates buy and sell opportunities.
How to Trade with Stochastic Indicator?
While trading with the indicator we need to focus on two lines %K and %D. Here, the %K line is a fast line whereas %D is a slow line. When the two intersects each other it generates buying and selling opportunities.
When the % K line intersects the %D line near the oversold level with the %K line above the %D line it signals a bullish crossover and here we need to make a buy trade. Similarly, When the %K intersects the %D line near the overbought level it signals the bearish crossover and here we need to make a sell trade.
Make buy trade at a bullish crossover
As we can see above the %K and %D intersects each other below line 20 (Oversold level) with the %K line above the %D it signals a bullish crossover and here we need to make a buy trade.
Make sell trade at a bearish crossover
Similarly, We can see above that the %K and % D line intersects each other above line 80 (Overbought region) It signals a bearish crossover and here we need to make a sell trade.
How to deal with Divergence in Stochastic Indicator and the price?
When you are trading with a stochastic Indicator you will notice the divergence multiple times. This means that price and the indicator is moving in the opposite direction.
Multiple times you will notice that the price is moving down whereas the indicator is stepping up Similarly, sometimes you will notice that the price is stepping up whereas the indicator shows the downfall of the price.
As you can see above the price is stepping up whereas the indicator shows the downfall of the price. It means that the trend reversal is surely to come.
So, I have done my part. I have covered everything regarding the Stochastic indicator. I hope you must have found this article helpful. You can practice the indicator more properly in the Olymp Trade demo account and comment below on how many correct trades you made.