3 Types of Index Stochastic Trading Indicators

Fast, Slow and Full Stochastic

There are 3 types of Indices Stochastic Oscillator: fast, slow and full stochastics.

All the 3 editions of this stochastic oscillator indicator look at a given period for example the 10-day period, & measure how today's price close compares to the high and low range of the time period that is being considered in the Indices calculation of stochastic oscillator.

Stochastic oscillator works based on the principle that:

During an upward trend, price action will tend to close at the high of the candlestick.
During a downwards trend, price action tends to close at the low of the candlestick.

Stochastic Oscillator indicator shows the strength of the trends, & identifies times when a Index currency is oversold or over-bought.

Fast Stochastics

Fast Stochastics Indicator Indicator - fast stochastic oscillator trading plots two lines, one solid and one dotted on the indicator section. These 2 lines are called the %K line & %D line. In this editions the %K & %D lines are calculated differently from other versions, so as to add smoothing out.

One disadvantage of using this fast stochastic Indices indicator version is that the %K & %D lines are too sensitive & they often give Indices trading whipsaws when they get to the over-bought & oversold levels. The fast stochastic oscillator indicator lines are prone to fake trading signals/whipsaws.

Slow Stochastic Indicator

Slow Stochastics Indicator - slow stochastic oscillator indicator smoothes out price data used for the original calculation & it is used by many Stock Index traders. This slow stochastic Indices indicator version is less prone to whipsaws compared to the fast stochastic edition.

For the slow stochastic Index indicator. A 3 period moving average is used to smooth out stochastic oscillator indicator lines. The MA isn't that of price action but of the stochastic oscillator indicator lines data.

Full Stochastics Indicator Indicator

Full Stochastics - this stochastic oscillator does not use a fixed MA period, like the slow Index stochastic oscillator version above. Traders don't want to use a fixed setting to calculate the stochastic Stock Index indicator.

Because of this reason the full stochastic was developed by traders & it is more flexible than the earlier two Index stochastic oscillator versions.

Full stochastic oscillator indicator version allows Index traders to choose & select the period they want for the fast & slow Index stochastic indicator line.

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3 Types of Index Stochastic Trading Indicators