Stochastic Indicator or Stochastic Oscillator is one of the most popular members of the Oscillator family. this indicator was developed by George C. Lane in 1950. and you can easily find this indicator on the IQ Option trading platform.

 

KEY POINTS

 

  •  Stochastic indicator is a momentum-based indicator that helps you to identify the current location of the security closing price.

 

  • This indicator is very much similar to RSI. and you can use this indicator to get high-quality buy and sell signals using the overbought and oversold levels.

 

  • The indicator use two moving average lines i.e %K and %D. where %K is a slow line and %D is a fast line. and the intersection of these two lines generates buy and sell signals.

 

  • When the two lines intersect below line 20 that means that the market is at an oversold level similarly,  when the two lines intersect above line 80 it means that the market is at an overbought level.

 

CONFIGURE STOCHASTIC INDICATOR AT IQ OPTION

 

You can configure the Stochastic Indicator easily by logging in to your IQ Option account => next click on the indicator icon at the bottom => later find the Stochastic oscillator in the popular section.

 

 

You can always change the colour of the indicator lines or you can darken it line for better visibility. => click colours and display to change it.

 

HOW TO IDENTIFY A BULLISH TREND USING A STOCHASTIC INDICATOR 

 

 

When the two lines intersect each other below or near line 20. It means that the market is at an oversold level which means we can expect an upcoming bullish trend. and here, we can place a buy trade with a long time frame.

 

HOW TO IDENTIFY A BEARISH TREND USING A STOCHASTIC INDICATOR 

 

 

Just like above, when the two lines intersect each other above line 80. It means, we can expect an upcoming bearish trend and here, we can place a sell trade with a long time frame.

 

DEALING WITH STOCHASTIC INDICATOR DIVERGENCE

 

 

If you observe the indicator properly. you will notice a few times that the indicator and the price are moving in opposite directions or not moving in an equivalent direction. This usually happens when you use a short time frame chart or due to indicator lag. In such cases, It is recommended to wait for the trend clearance and resume trading after the same.

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