How Stochastic Trading Indicator Works

The Stochastic oscillator indicator uses time periods to calculate the fast & slow lines. The number of time periods used to calculate the %K and %D line depends on what purpose a indices trader is using the Stochastics oscillator indicator for.

A trader using the Stochastic oscillator indicator in combination with a trend indicator to see overbought & oversold levels, a trader can use periods 10 periods.
The default period used by the stochastics trading indicator is 12.

Traders should not use stochastic indicator alone for making decisions, but should use this Stochastic oscillator technical indicator in combination with other trading indicators.

In ranging markets this Stochastic oscillator indicator can be used to display over-sold/overbought levels as potential profit booking points when trading the market.

Oversold & overbought indices trading levels by default are 20 and 80, but other traders use 30 & 70.

To look for 'overbought' region at the indicator's 80% stochastic indices trading oscillator mark is used

To look for 'oversold' region 20% stochastic indices trading oscillator mark is use.

The overbought and over-sold levels are illustrated as dotted horizontal lines on the stochastic oscillator. These levels can also be adjusted to the 30 and 70 levels.

Overbought and Oversold Levels on Stochastic Oscillator Indicator

Overbought and Oversold Levels on Stochastic Oscillator Indicator

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How Stochastic Trading Indicator Works