Nov 16

Stochastic Forex Trading Strategy

Stochastic is an oscillator that has been used for long time to determine the market trends and concentration and is currently the default indicator used in many forex trading applications. It is particularly useful to determine overbought and oversold conditions in the market and to signal buys and sells accordingly. Stochastic uses 0 to 100-based scale to determine those conditions. If its line in the chart is above 80, then an overbought condition is taking place in the market. Conversely, if the line is below 20, then an oversold condition is the one that is taking place. Buying and selling signals can be determined according to the number appearing on the chart.

How to Trade with Stochastic Forex Trading Strategy

Stochastic is a very simple to use. As we have already known, stochastic determines when overbought and oversold conditions occur in the market. The general market rule applies here: you buy when oversold condition occurs and you sell when overbought condition occurs in the market. Because other traders will do the same, either condition will occur only within a limited period of time before a reversal happens, during which price will either drop or rise, depending on the condition that is currently occurring. For beginners and professionals alike, stochastic is considered the easiest and the most convenient indicator to use to determine market trends.

Stochastic Forex trading Strategy

Stochastic Forex trading Strategy

Convergence Strategy

It is possible to use Stochastic to determine convergence and divergence and to signal buy and sell accordingly. A buy signal occurs when the market graph is going down whereas the stochastic oscillator goes to the opposite direction. A sell signal, conversely, is likely to occur when the movements go to different way: the market graph is going up whereas the scholastic oscillator goes down. It is important to notice, though, that different traders may interpret the oscillator movement in various different ways.

Convergence Forex Trading Strategy

Convergence Forex Trading Strategy

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