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Stochastic Oscillator (HowToTrade Cheat Sheet)

The stochastic oscillator is a momentum indicator that measures the closing price relative to the price range over a period of time. It uses two lines, %K and %D, to indicate when a security is overbought or oversold based on where they are relative to the 80 and 20 lines. Crossovers of the %K and %D lines can signal trend reversals. It works best when combined with other indicators and price action analysis.

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Med Ayman Ayoub
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384 views

Stochastic Oscillator (HowToTrade Cheat Sheet)

The stochastic oscillator is a momentum indicator that measures the closing price relative to the price range over a period of time. It uses two lines, %K and %D, to indicate when a security is overbought or oversold based on where they are relative to the 80 and 20 lines. Crossovers of the %K and %D lines can signal trend reversals. It works best when combined with other indicators and price action analysis.

Uploaded by

Med Ayman Ayoub
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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STOCHASTIC INDICATOR

C H E A T S H E E T

WHAT IS A STOCHASTIC OSCILLATOR?


• A leading momentum indicator that measures the relationship between the closing price and
the priceʼs range over a set period of time.

• Can show when an asset is overbought or oversold.

• Should be used in conjunction with other indicators or price action.

HOW DOES IT WORK?


• Uses 2 lines: a fast line (%K) and a slow line (%D).

• The indicator ranges between 0 and 100. Below the dashed 20 line can indicate oversold, and
above the dashed 80 line can indicate overbought.

• Buy and sell signals are created when the %K line crosses the %D line.

• Crossing lines could indicate a trend reversal as momentum shifts.

formula (No need to know this as your trading platform will do the calculations)

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The information provided within this PDF is for educational purposes only.
1. USING THE OVERBOUGHT LINE AND OVERSOLD LINE FOR TREND
• A leading momentum indicator that measures the relationship between the closing price and the priceʼs
range over a set period of time.

• Can show when an asset is overbought or oversold.

• Should be used in conjunction with other indicators or price action.

2. USING LINE CROSSOVERS IN A RANGING MARKET


• Buy when %K (blue line) crosses above %D (red line).

• Sell when %K (blue line) crosses below %D (red line).

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The information provided within this PDF is for educational purposes only.
3. ENTER A TREND ON A PULLBACK.
• Use the 15 minute chart to determine entries & exits.

• When %K (blue) crosses up and then down the 80 line it could indicate a sell trade.

• Use higher time frames to determine the direction of the trend.

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The information provided within this PDF is for educational purposes only.

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