Stochastic Indicator Cross-Over Signals

One approach to interpreting and deriving insights from the signals generated by the Stochastics Oscillator indicator mirrors that of a moving average crossover technique. Within the Stochastic oscillator, a crossover event signifies a trading signal when the %K and %D lines intersect.

Since these crossover signals generate the most Stock Index whipsaws out of the stochastic oscillator signal interpretations of the indices covered thus far, they should be treated cautiously. The Fast Stochastics Indicator version is particularly prone to false signals or whipsaws.

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.

Because stochastic crossovers signals of %K and %D are often not reliable, they should be checked with other indicators.

The Stochastic Oscillator Indicator Center-line

The stochastic oscillator's middle point is at the 50% mark on the stochastic indicator screen. This means that buyers and sellers are equally strong. When the stochastic indicator goes past the center line, it can show whether buyers or sellers will start to take control of how the market moves.

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 is 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