Technical Indicator MEGA Reference Part 52b – Stochastic Oscillator Part 2 of 3

Stochastic Buy & Sell Signals

Stochastic Potential Buy Signal

A trader might interpret a buy signal when the Stochastic is below the 20 oversold line and the %K line crosses over the %D line.

Stochastic Potential Sell Signal

A trader might interpret a sell signal when the Stochastic is above the 80 overbought line and the %K line crosses below the %D line, sell.

An example of possible Stochastic Fast buy and sell signals are illustrated below in the chart of the E-mini S&P 500 Future:

Stochastic Slow is presented below in the chart of the E-mini Russell 2000 Futures contract. Notice how much smoother the %K and %D lines are and how many fewer false signals were given by the Stochastic Slow than were given by the Stochastic Fast indicator.

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