Forex Strategy: Trading with Stochastics
Stochastics are amongst the most popular technical indicators when it comes to Forex Trading. Unfortunately most traders use them incorrectly. In this article we will review the correct way to use this popular technical indicator. George Lane developed this indicator in the late 1950s. Stochastics measure the current close relative to the range (high/low) over a set of periods. Stochastics consist of two lines: %K – Is the main line and is usually displayed as a solid line %D – Is simply a moving average of the %K and is usually displayed as a dotted line There are three types of Stochastics: Full, fast and slow stochastics. Slow stochastics are simply a smother version of the fast stochastics, and full stochastics are even a smother version of the slow stochastics. Interpretation: Buy when %K falls below the oversold level (below 20) and rises back above the same level. Sell when %K rises above de overbought level (above 80) and falls back below the same level. The interpretation abov