Basics of Stochastic Indicator
Stochastic Indicator is an indicating momentum which can be used to locate a close relative from a high range to the low range over a given number of periods. It was first developed by George C. Lane during the 1950s. A Stochastic Indicator is commonly used to compare today’s price of the forex with the price that was there a few days or weeks ago. Usually in an uptrend, there is a rise in the price to the upper end to that of the recent one and on the flip side in the downtrend, the price falls to the bottom. This indicator plays a major role in the stock market.
The major line of the Stochastic Indicator is known as %K which is displayed as a solid line and the other line that is known as the %D is displayed in a dotted line, as a 3-day moving average of the %K. When the price makes a high and the stochastic makes a lower high at the same time, it is known as the “Bearish Divergence”. While the other divergence is known as the “Bullish Divergence” which says that if the price makes a high when the stochastic makes a higher low.
Stochastic Indicator is an indicating momentum which can be used to locate a close relative from a high range to the low range over a given number of periods. It was first developed by George C. Lane during the 1950s. A Stochastic Indicator is commonly used to compare today’s price of the forex with the price that was there a few days or weeks ago. Usually in an uptrend, there is a rise in the price to the upper end to that of the recent one and on the flip side in the downtrend, the price falls to the bottom. This indicator plays a major role in the stock market.
The major line of the Stochastic Indicator is known as %K which is displayed as a solid line and the other line that is known as the %D is displayed in a dotted line, as a 3-day moving average of the %K. When the price makes a high and the stochastic makes a lower high at the same time, it is known as the “Bearish Divergence”. While the other divergence is known as the “Bullish Divergence” which says that if the price makes a high when the stochastic makes a higher low.