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Indices Stochastic Oscillator Indices Expert Advisor Setup

Indices Stochastic Oscillator Indices Expert Advisor Setup - Setting Up Stochastic Oscillator Indices Expert Advisor - A Indices trader can come up with an Stochastic Oscillator Indices Expert Advisor based on the Stochastic Oscillator stock indices indicator explained below.


Indices Stochastic Oscillator Expert Advisor rules can be combined with other indices indicators to come up with other EA Indices Trading Robots that trade using rules based on two or more indicators combined to form a stock indexes trading system.


Stochastic Oscillator Indices Technical Analysis and Stochastic Oscillator Indices Trading Signals

Developed by George C. Lane


The Stochastic Oscillator is a momentum indicator - it shows the relation between the current closing stock indexes price relative to the high and low range over a given number of n periods. The Oscillator uses a scale of 0-100 to draw its values.

Stochastic Oscillator Indices Indicator

Indices Stochastic Oscillator Expert Advisor Setup


This Oscillator is based on the theory that in an up indices trend market the stock indexes price closes near the high of the stock indexes price range and in a downward trending market the stock indexes price will close near the low of the stock indexes price range.


The Stochastic Lines are drawn as 2 lines- %K and %D.


  • Fast line %K is the main

  • Slow line %D is the signal


3 Types of Stochastics: Fast, Slow and Full

There are 3 types are: fast, slow and full Stochastic. The three indicators look at a given chart period for example the 14-day period, and measures how the stock indexes price of today’s close compares to the high/low range of the time period that is being used to calculate the stochastic.


This oscillator works on the principle that:


  • In an upward indices trend, stock indexes price tends to close at the high of the candlestick.

  • In a downward indices trend, stock indexes price tends to close at the low of the candlestick.


This indicator shows the momentum of the Indices trends, and identifies the times when a market is overbought or oversold.


Indices Technical Analysis and Generating Indices Trading Signals

The most common techniques used for technical analysis of Stochastic Oscillators to generate stock indices signals are crossovers signals, divergence signals and overbought oversold levels. The following are the methods used for generating trade signals


Crossover Signals

Buy signal- %K line crosses above the %D line (both lines moving up)

Sell signal- %K line crosses below the %D line (both lines moving down)


50-level Crossover:

Buy signal - when stochastic lines cross above 50 a buy stock indices signal is generated.

Sell signal - when stochastic lines cross below 50 a sell stock indices signal is generated.


Divergence Indices Trading

Stochastic is also used to look for divergences between this indicator and the indices price.


This is used to determine potential indices trend reversal stock indices signals.


Upward/rising indices trend reversal- identified by a classic bearish divergence


indices trend reversal- identified by a classic bearish divergence

Indices Trend reversal - Indices Stochastic Oscillator Expert Advisor Setup


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Downward/descending indices trend reversal- identified by a classic bullish divergence

indices trend reversal- identified by a classic bullish divergence

Indices Trend reversal - Indices Stochastic Oscillator Expert Advisor Setup


Overbought/Oversold Levels

Stochastic is mainly used to identify potential overbought and oversold conditions in stock indexes price movements.


  • Overbought values greater than 70 level - A sell stock indices signal occurs when the oscillator rises above 70% and then falls below this level.

Overbought levels Stochastic Oscillator values greater 70

Overbought - Values Greater 70 - Indices Stochastic Oscillator Expert Advisor Setup



  • Oversold values less than 30 level - a buy stock indices signal is generated when the oscillator goes below 30% and then rises above this level.

Oversold levels Stochastic Oscillator values less than 30

Oversold - Values Less Than 30 - Indices Stochastic Oscillator Expert Advisor Setup


Trades are generated when the Stochastic Oscillator crosses these levels. However, overbought/oversold levels are prone to whipsaws especially when the stock indexes trading market is trending upwards or downwards.

 

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