The number of periods used in the indicator can be varied according to the purpose for which the Stochastic Oscillator is used:. Slow Stochastic incorporates further smoothing and is often used to provide a more reliable signal.
If the Stochastic Oscillator hovers near it signals accumulation. Stochastic lurking near zero indicates distribution. The shape of a Stochastic bottom gives some indication of the ensuing rally. A narrow bottom that is not very deep indicates that bears are weak and that the following rally should be strong. A broad, deep bottom signals that bears are strong and that the rally should be weak. The same applies to Stochastic tops.
Narrow tops indicate that the bulls are weak and that the correction is likely to be severe. High, wide tops indicate that bulls are strong and the correction is likely to be weak.
Place stop-losses below the most recent minor Low when going long or above the most recent minor High when going short. Lane also used Classic Divergences , a type of triple divergence. Only take signals in the direction of the trend and never go long when the Stochastic Oscillator is overbought, nor short when oversold.
Use trailing buy- and sell-stops to enter trades and protect yourself with stop-losses. When you are stopped in, place a stop loss below the Low of the recent down-trend the lowest Low since the signal day. If Stochastic Oscillator rises above the Overbought line, place a trailing sell-stop. When you are stopped in, place a stop loss above the High of the recent up-trend the highest High since the signal day.
The Slow Stochastic Example illustrates the trading signals. This study focuses on the trailing stop entry technique used in a trending market. The MA is used as the trend indicator with closing price as a filter. See Indicator Panel for directions on how to set up an indicator. The default settings are:. To alter the default settings - see Edit Indicator Settings. Identify top-performing stocks using proprietary Twiggs Money Flow, Twiggs Momentum and powerful stock screens.
More than , subscribers - Read it now. We do not spam. The indicator consists of two lines: The number of periods used in the indicator can be varied according to the purpose for which the Stochastic Oscillator is used: The monthly What's New newsletter covers new articles on Trading and the Economy, as well as new software updates. Protect your capital with money management and trailing stop losses.More...