What is the best setting for Stochastic?

What is the best setting for Stochastic?

For OB/OS signals, the Stochastic setting of 14,3,3 works well. The higher the time frame the better, but usually a H4 or a Daily chart is the optimum for day traders and swing traders.

What is a good Stochastic number?

The stochastic indicator is scaled between 0 and 100. A reading above 80 indicates that the instrument is trading near the top of its high-low range. A reading below 20 signals that the instrument is trading near the bottom of its high-low range.

What does stochastic indicator tell you?

The stochastic indicator is a momentum indicator developed by George C. Lane in the 1950s, which shows the position of the most recent closing price relative to the previous high-low range. The indicator measures momentum by comparing the closing price with the previous trading range over a specific period of time.

How reliable is stochastic?

Stochastics are a favored technical indicator because it is easy to understand and has a high degree of accuracy. Stochastics are used to show when a stock has moved into an overbought or oversold position.

Is RSI or stochastic better?

While relative strength index was designed to measure the speed of price movements, the stochastic oscillator formula works best when the market is trading in consistent ranges. Generally speaking, RSI is more useful in trending markets, and stochastics are more useful in sideways or choppy markets.

Is fast stochastic good?

Taking a three-period moving average of the fast stochastics %K has proved to be an effective way to increase the quality of transaction signals; it also reduces the number of false crossovers.

Is stochastic accurate?

key takeaways. Stochastics are a favored technical indicator because it is easy to understand and has a high degree of accuracy. it can be beneficial to use stochastics in conjunction with and an oscillator like the relative strength index (RSI) together.

Is fast or slow stochastic better?

The “fast” stochastic uses the most recent price data, while the “slow” stochastic uses a moving average. Therefore, the fast version will react more quickly with timely signals, but may also produce false signals. The slow version will be smoother, taking more time to produce signals, but may be more accurate.

Is RSI or Stochastic better?

What is Stochastic indicator in forex?

The stochastic oscillator is a momentum indicator that is widely used in forex trading to pinpoint potential trend reversals. This indicator measures momentum by comparing closing price to the trading range over a given period. When these two lines intersect, it signals that a trend shift may be approaching.

Is stochastic or MACD better?

Separately, the two indicators function on different technical premises and work alone; compared to the stochastic, which ignores market jolts, the MACD is a more reliable option as a sole trading indicator.

When to use a breakout in the stochastic indicator?

Breakout trading: When you see that the Stochastic is suddenly accelerating into one direction and the two Stochastic bands are widening, then it can signal the start of a new trend. If you can also spot a breakout out of sideways range, even better.

How are price candles used in the stochastic indicator?

The stochastic indicator analyzes a price range over a specific time period or price candles; typical settings for the Stochastic are 5 or 14 periods/price candles. This means that the Stochastic indicator takes the absolute high and the absolute low of that period and compares it to the closing price.

What does it mean when the stochastic is above 80?

As we have seen above, when the Stochastic is above 80 it means that the trend is strong and not, that it is overbought and likely to reverse. A high Stochastic means that the price is able to close near the top and it keeps pushing higher.

What does a high and low stochastic mean?

You can see, the high Stochastic shows us that price was very strong over the 5 candle period and that the recent candles are pushing higher. Conversely, a low Stochastic value indicates that the momentum to the downside is strong. In the graphic we can see that price only closed $5 above the low of the range at $50.