Stochastic oscillator is an indicator used to measure the saturation of the market. But compared with the RSI, Stochastic has the advantage of having to buy and sell signals.
Market said to be overbought when stochastick value above 80, and said to be oversold if the market valued under 20.
In the overbought condition, we can get open buy sip take a position, because the market will reverse direction down. And the oversold condition we can get ready to take a position open sell, because the market will reverse direction upward.
There are two strategies that can be made by using stochastic. Namely:
1. Buy bottom sell top Strategy
Ie open positions when the market is saturated and the intersection of stochastick.
Open
a buy entry point is when stochastic worth under 20 and cut the signal
line from the main line above, so that the next signal line will be
under the main line.
While
the entry point to Open Sell is when stochastic worth over 80 and
signal lines cut the main line from the bottom, so that the next line of
the signal will be above the main line.
2. Convergent strategy
Stochastic
indicator may also experience convergent and divergent, therefore, in
the event of convergent or divergent we can use it as a time to enter
the market.
Entry
point open buy is when there is a graph that while stochasticknya
rising more modestly, plus the signal line intersecting the main line
from above.
To
open sell entry point, is when the graph of rising while its stochastic
modestly, plus the signal line intersecting the main line from the
bottom.
That means using the stochastic oscillator in technical analysis.
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