Stochastic Oscillator XAUUSD Technical Analysis and Stochastic Oscillator XAUUSD Signals
Developed by George C. Lane
The Stochastic Oscillator is a momentum indicator - it shows the relation between the current closing gold price relative to the high & low range over a given number of n periods. The Oscillator uses a scale of 0-100 to draw its values.
This Oscillator is based on the theory that in an up xauusd trend market the gold price closes near the high of the gold price range & in a downward trending market the gold price will close near the low of the gold price range.
The Stochastic Lines are drawn as 2 lines- %K & %D.
- Fast line %K is the main
- Slow line %D is the signal
3 Types of Stochastics Gold Oscillators: Fast, Slow & Full Stochastics
There are 3 types are: fast, slow and full Stochastic. 3 indicators look at a given chart period for examples the 14-day period, and measures how the gold price of today’s close compares to the high/low range of the time period that is being used to calculate the stochastic.
This oscillator works on the principle that:
- In an upward xauusd trend, gold price tends to close at the high of the candlestick.
- In a downward xauusd trend, gold price tends to close at the low of the candlestick.
This xauusd indicator shows the momentum of the XAUUSD trends, and identifies the times when a market is overbought or oversold.
XAUUSD Technical Analysis and How to Generate Trading Signals
Most common techniques used for analysis of Stochastic Oscillators to generate xauusd signals are cross overs trading signals, divergence signals & overbought over-sold levels. The following are the techniques used for generating signals
XAUUSD Trading Crossover Trading Signals
Buy signal - %K line crosses above the %D line (both lines heading up)
Sell signal - %K line crosses below %D line (both lines heading down)
50-level Crossover:
Buy signal - when stochastic lines cross above 50 a buy signal is generated.
Sell signal - when stochastic lines cross below 50 a sell trading signal is generated.
Divergence XAUUSD
Stochastic is also used to look for divergences between this indicator & the gold price.
This is used to determine potential xauusd trend reversal signals.
Upward/rising xauusd trend reversal - identified by a classic bearish divergence
XAUUSD Trend reversal - identified by a classic bearish divergence
Downward/descending xauusd trend reversal - identified by a classic bullish divergence
XAUUSD Trend reversal - identified by a classic bullish divergence
Oversold/Overbought Levels on Indicator
Stochastic is mainly used to identify potential overbought and over-sold conditions in gold price movements.
- Over-bought values greater than 70 level - A sell signal occurs when the oscillator rises above 70% & then falls below this level.
Overbought - Values Greater 70
- Over-sold values less than 30 level - a buy trading signal is generated when oscillator goes below 30% and then rises above this level.
Oversold - Values Less Than 30
Trades are generated when Stochastic Oscillator crosses these levels. However, overbought/oversold levels are prone to whipsaws especially when the gold market is trending upwards or downwards.
