Stochastic is one of the oldest indicators in Forex technical analysis. This indicator is applied to the chart with a few mouse clicks. The algorithm instantly calculates indicators for any selected period of price changes.
Stochastic Oscillator review
The stochastic leading indicator, like most instruments in this category, is set under the price chart in a separate window. Outwardly, it is similar to RSI, but unlike the histogram oscillators Awesome Oscillator and MACD, it is linear. In its classic form, Stochastic has not one, but two moving ones, which in combination with standard settings makes it more dynamic than RSI, which allows you to enter extremely oversold or overbought conditions more often.
The fast line is designated “% K” and is built based on the maximum and minimum prices for a specific period, as well as the extreme price value. The higher the current price is compared to other parameters, the higher the last % K point in the indicator window will be.
The slow line, drawn with a dashed line in the original version of Stochastic, carries the designation “% D”, is a moving average concerning % K. If the% K period determines how many price values will be taken into account when building the fast line, then% D determines how many extreme % K values will be taken into account to build the slow line.
Installing the Stochastic Oscillator
Stochastic is included in the MetaTrader 4 standard technical tools package. For its quick installation, select the “List of indicators” in the upper toolbar and select «Oscillators» – «Stochastic Oscillator» in the drop-down list.