How Stochastic Oscillator Indicator Works

The Stochastic oscillator indicator uses time periods to calculate the fast and slow lines. The number of time periods used to calculate the %K & %D line depends on what purpose a trader is using the Stochastic oscillator indicator for.

• A trader using the Stochastic oscillator indicator in combination with a trend indicator to see overbought & oversold levels, one-can use periods 10 periods.
• The default period used by stochastic forex oscillator indicator is 12.

Forex traders should not use stochastic indicator alone for making forex trading decisions, but should use this Stochastic oscillator indicator in combination with other forex technical indicators.

In ranging forex markets this Stochastic oscillator technical indicator can be used to show over-sold/over-bought levels as potential profit-taking points when trading the forex trading market.

Oversold and overbought forex levels by default are 20 and 80, but other forex traders use 30 & 70.

To look for 'overbought' region at the indicator's 80% stochastic forex oscillator mark is used

To look for 'oversold' region 20% stochastic forex oscillator mark is use.

The overbought & oversold levels are displayed as dotted horizontal lines on the stochastic oscillator indicator. These levels can also be adjusted to the 30 and 70 levels.

Overbought & Oversold Levels on Stochastic Oscillator Indicator