Stochastic Oscillator integer explained for beginners.

Stochastic Oscillator integer explained for beginners.

28 June 2018, 12:15
Mpendulo Chiliza
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What is a Stochastic Oscillator Indicator?

      Stochastic Oscillator is a technical indicator that returns a value between 0 to 100.
      Basically showing the current price compared to the highest and lowest price over a period (14 bars).

      Hence: on a daily chart, the period would be 14 weeks, and on a munite chart the period would be 14 minutes.
     
    example:  

if( iStochastic(NULL,0,5,3,3,MODE_SMA,0,MODE_MAIN,0) > 80 ){
       //too many sellers on the market (less buyers)
}
else if ( iStochastic(NULL,0,5,3,3,MODE_SMA,0,MODE_MAIN,0) < 20 ){
       //too many buyers on the market (less sellers)
}

    

    
   

What does over bought mean?

We say a security has been over bought if its Stochastic is above 80.

    NOTE: this does not necessarily means the price will drop immediately, but you can use this new knowledge reference.

   

What does under baught mean?

We say a security has been over baought if its Stochastic is below 20.

    NOTE: price can stay low very long, but you can use this information to predict a reversal, example, if the Stochastic value was below 20, and now above 50, you now can be sure that the prices are now moving higher.
    
   

The meaning of iStochastic() value?

    iStochastic() value Close to Zero ? The current security is trading near or below the lowest price over the look period.

    iStochastic() value Close to 100 ? The current security is trading near or above the highest price over the look period.


CONCLUSION: I hope this blog post was helpful to you, to better understand and use the Stochastic Oscillator Indicator.


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