Technical Analysis

Stochastics

Introduction

www.cmsfx.comThe Stochastic indicator is an oscillator that measures momentum. It is based on the idea that during an uptrend prices tend to close at the high of the candle, and during a downtrend at the low of the candle. It shows the strength of trends and the strength of oversold and overbought levels.

Stochastic is one of the main used indicators so many traders act on its signals. Certain patterns, such as divergences, can give very strong predictions of market activity. Stochastic can give more signals than the other main momentum indicator, RSI, but they should be used in conjunction for the best information.

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