Scroll to continue
Home » Technical » Learn How To Trade The Stochastic Oscillator

Learn How To Trade The Stochastic Oscillator

The Stochastic oscillator, invented by George Lane measures momentum in the market and consists of two lines (%D and %K).

The Stochastic oscillator oscillates between 0 and 100 while readings above 80 are considered overbought and readings below 20 considered oversold. Values between 20 and 80 are considered neutral.

AUD/USD Stochastic Oscillator (Stoch) Hourly Chart

Trade The Stochastic Oscillator

Type of technical indicator: Momentum oscillator

Forex signals from the Stochastic oscillator

1. In trending markets

Oversold values (0-20): Look to buy dips in uptrends.
Overbought values (80-100): Look to sell rallies in downtrends.

2. In rangebound markets

Oversold values (0-20): Look for opportunities to buy near the low of the trading range.
Overbought values (80-100): Look for opportunities to sell near the high of the trading range.

Powerful trading combinations with the Stochastic indicator

Always use the Stochastic oscillator in conjunction with other analysis tools/indicators to make better trading decisions in the forex market.