Stochastic Trading Indicator Crossover Signals

One way to interpret the signals provided by the Stochastic Indicator is similar to a moving average cross over trading strategy. In the Stochastic oscillator indicator, a crossover signal happens when the %K & %D lines cross over. These crossover trading signals should be taken with scrutiny as, out of the stochastics oscillator trading signal interpretations explained so far, they produce the most whipsaw signals. Whipsaws or False trading signals are especially common in Fast Stochastic Oscillator version.

Stochastic Cross-over Signals:

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

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

The Stochastics Indicator Center Line

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

Stochastic Center-Line Crossovers Signals

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

Learn More Lessons & Topics:

Trade Stock Indices

Stochastic Trading Indicator Crossover Signals