Trade Stock Indices

How Stochastic Indicator Works

The Stochastic oscillator uses time periods to build its fast and slow lines. The periods for %K and %D depend on how a trader plans to use the indicator.

  • A Index trader using the Stochastic oscillator indicator in combination with a trend indicator to see overbought and oversold levels, one can use periods 10 periods.
  • The default period used by the stochastic Index oscillator indicator is 12.


Stock index traders should not rely on stochastic alone. Combine it with other indicators for decisions.

In sideway markets, the Stochastic helps spot oversold or overbought points. Use them to take profits.

While the default oversold and overbought thresholds are set at 20 and 80, some other Indices Traders opt for 30 and 70.

Seek the 'overbought' area at the indicator's 80% mark of the stochastic Indices oscillator.

To look for "oversold" region 20% stochastic Indices oscillator mark is use.

The points where the market is considered overbought or oversold are shown as dashed lines on the stochastic oscillator indicator, and can be adjusted to the 30 and 70 levels.

How Stochastic Oscillator Works

Overbought and Oversold Levels on Stochastic Indicator

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Stock Indices Broker