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This is a discussion on Forex Articles within the General Discussion forums, part of the Trading Forum category; The stochastic oscillator measures the closing price of a candlestick against the average closing price of a certain amount of ...

          
   
  1. #141
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    Using the Stochastic Oscillator in Trading

    The stochastic oscillator measures the closing price of a candlestick against the average closing price of a certain amount of candlesticks before it. For example, it shows whether this candlestick is overbought or oversold as far as the overall range of the market is concerned. This momentum indicator is not to be used in a trending market, but rather a market that has been going sideways. While there are strategies that use them with trends, that is less normal than looking at this as an opportunity to confirm or ignore support or resistance.

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    The stochastic oscillator is shown in a window at the bottom of the chart, separate from price. It has two lines which act like moving averages, the crisscross the panel. The standard situation is to see the 20 and the 80 level marked as both the overbought and oversold condition.

    Occasionally the indicator will crisscross the lines above the 80, which of course is the overbought condition, or below the 20, which is the oversold condition. This is how most people will use stochastic oscillators, as a sign that perhaps it’s time to buy and sell based upon a resumption of what we seen over the last several candles. However, in a trend this reliability tends to disappear. It is because of this that you will often see stochastics offer more reliability when you include support and resistance.

    Sometimes, people will use the stochastic oscillator for finding divergence. Divergence is when the momentum of an asset isn’t matching the price. For example, we could be seeing “lower highs” in the stochastic oscillator, but “higher highs” in the price window. This shows that perhaps the underlying momentum is starting to slow down. Looking at the chart below, you can see that the Euro has been rallying against the Polish zloty over the last several candlesticks, but at the same time the “highs” in the stochastic oscillator are getting lower. This suggests that perhaps the momentum is slowing down and it could lead to a selloff. This isn’t reason enough to start shorting the market, but it does give you a bit of a “heads up” as to what could happen.


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  2. #142
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    Low Risk Forex Trading

    One of the things that attracts many people to Forex trading is the potential for significant profits in a relatively small amount of time due to the use of leverage. However, with the potential for gains comes a significant potential for losses that must not be overlooked. To protect your account, it's a good idea to look at the bigger picture, which means not just eying the potential profits, but looking for ways to trade in a way that has lower risk. Your rewards may be lower in the short term, but with a low risk Forex trading strategy you will hopefully see more success in the long term.

    Think of it this way: there is no business that you can get into that doesn’t have a certain amount of risk. For example, if you decided to open up a convenience store, there is also the possibility that you could not make enough money to keep the doors open. However, if you do the right research and make the right business decisions, you increase your likelihood of building a successful business. In this sense, your trading business is very similar. You must do proper market research in order to make solid trading decisions. You'll still have some risk when you trade, but the risk will be reduced by your own understanding of the markets and how they move.

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  3. #143
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    I am happy that you guys are sharing your experiences with us. Traders will require adequate trading understanding to ensure rational decision making process. Again, a forex trader must try to attain sufficient trading knowledge with the help of various learning tolls. And in the present time, forex forums are being established as an educational tool for the traders where expert traders are sharing their reviews and suggestions to the beginners.

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