Stochastics Buy & Sell Signals
Stochastics Potential Buy Signal
A trader might interpret a buy signal when the Stochastic is below the 20 oversold line and the %K line crosses over the %D line.
Stochastics Potential Sell Signal
A trader might interpret a sell signal when the Stochastic is above the 80 overbought line and the %K line crosses below the %D line, sell.
An example of possible Stochastic Fast buy and sell signals are illustrated below in the chart of the E-mini S&P 500 Future:
Stochastic Slow is presented below in the chart of the E-mini Russell 2000 Futures contract. Notice how much smoother the %K and %D lines are and how many fewer false signals were given by the Stochastic Slow than were given by the Stochastic Fast indicator.
The Stochastic technical analysis indicator might be helpful in detecting price divergences and confirming trend. This is discussed on the next page.
Next Page - Stochastic Price Divergences
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