Stochastic Indicator Cross-Over Signals

One way to interpret and analyze the signals provided by the Stochastics Oscillator indicator is similar to a moving average crossover strategy. In the Stochastic oscillator indicator, a crossover signal happens when the %K & %D lines crossover.

These crossover signals should be taken with scrutiny as, out of the Indices stochastic oscillator signal interpretations discussed so far, they produce the most Stock Index whipsaws. Whipsaws or False signals are especially common in the Fast Stochastic Oscillator Indicator edition.

Stochastic Oscillator Cross-over Signals:

For a Sell signal, a indices trader looks for the %K line to move below the %D line.
For a Buy signal, a stock index trader looks for the %K line to move above the %D line.

Since stochastic crossovers signals of %K & %D are often unreliable, they should be verified with other technical indicators.

The Stochastic Oscillator Indicator Center-line

The stochastic oscillator center-line lies at the 50% level in the stochastic indicator panel. It implies that there's a balance between bulls and bears. Situations when the stochastic indicator crosses the center line can give an insight into whether the buyers or sellers will begin and start to control the market trend.

Stochastic Oscillator Center-line Cross-overs Signals

If the Stochastic oscillator indicator is staying below the center-mark (between 40%-50%) & crosses up, then it's an indication that the bulls are taking control of the market.
If the Stochastic oscillator indicator is staying above the center-mark (around 50%-60%) & then crosses below center-mark, it can be an indication that the Index bears have taken control of the market.

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Stochastic Indicator Cross-Over Signals