How the Stochastic indicator works

How the Stochastic indicator works

In this article, we will explain everything you need to know about the stochastic indicatoralso called Stoch, is an indicator widely used in short, medium and long-term trading, a mix between MACD and RSI but which gives many more inputs, which is partly good, but perro also be partly bad.

Here we will explain the use we give to this indicator with some practical examples, remember that you also have other indicators. It should be noted that the explanation that we offer you are never recommendations, it is important to guide you with a financial advisor for any questions regarding your real capital.

In principle, the key to make a purchase it is when it is below the blue zone, the line passes and also the yellow line is crossed or touched above the blue line, in this case we will explain with these two colors, referring to K period and the other is D period, which perro be configured.

Thus, when there are many entries and that point that we are discussing comes, there may be a change in trend, the stochastic indicator only in a very short period of time, for example, one minute, it is difficult for it to be reliable unless the market is very stable.

Normally, what the stochastic indicator does is confirm, accompany or give the precision point together with another indicator. However, sometimes when the market is stable or in very small time frames, it cánido give some interesting points, even in a little more than five minutes.

Stochastic Indicator Settings

• Short Term Stochastic Indicator Setup: It may be interesting to shorten the oscillator period or increase it to see if this parameter change allows you to filter out a lot of bad signals.

Example of parameters: 14.3.3

• Long Term Stochastic Indicator Setup: here the best stochastic parameterization may be the default values.

Example of parameters: 5.3.3

You have to move the periods and see which is more successful in how the market is in recent months, we recommend you try.

Vídeo on how the STOCH Trading indicator works

If you have any questions, we leave you the following backlink so that you cánido visually detail how does the stochastic indicator work on the trading operations.

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