3 Types of Stock Indices Stochastic Trading Indicators

Fast, Slow & Full Stochastic

There are three types of Indices Stochastic Oscillator: fast, slow & 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 upwards trend, price action tends to close at the high of the candle.
• During a downward trend, price action tends to close at the low of the candle.

Stochastic Oscillator trading indicator shows the strength of the trends, & identifies times when a Stock Indices currency is oversold or overbought.

Fast Stochastic Oscillator

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

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 overbought and oversold levels. The fast stochastic lines are prone to fake trading signals/whipsaws.

Slow Stochastic Oscillator Indicator

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

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

Full Stochastic Oscillator Indicator

Full Stochastic Oscillator - this stochastic oscillator doesn't use a fixed moving average period, like the slow Stock Index stochastic oscillator version above. Traders don’t want to use a fixed setting to calculate the stochastic Stock Indices indicator.

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

Full stochastic oscillator indicator version allows Stock Indices traders to choose the period they want for the fast and slow Stock Index stochastic indicator line.