3 Types of Forex Stochastic Indicators

Fast, Slow and Full Stochastic

There are three types of Forex Stochastic Oscillator Indicators: fast, slow and full stochastic oscillator indicator.

All the 3 versions of this stochastic oscillator indicator look at a given period for example the 10-day period, and measure how today's price close compares to the high and low range of the time period that is being considered in the forex calculation of stochastic oscillator.

Stochastic oscillator indicator works based on the principle that:

• During an upward forex trend, price action tends to close at the high of the candle.
• During a downward forex trend, price action tends to close at the low of the candle.

Stochastic Oscillator indicator shows the strength of the Forex trends, and identifies times when a forex currency is oversold or overbought.

Fast Stochastic Oscillator Indicator

Fast Stochastic Oscillator Indicator - fast stochastic oscillator indicator plots 2 lines, one solid & one dotted on the indicator section. These two lines are called the %K line and %D line. In this versions the %K and %D lines are calculated differently from the other editions, so as to add extra smoothing.

One disadvantage of using this fast stochastic indicator version is that the %K and %D lines are too sensitive and they often give forex trading whipsaws when they get to the overbought and oversold levels. The fast stochastic lines are prone to fake forex signals/whipsaws.

Slow Stochastic Oscillator Indicator

Slow Stochastic Oscillator Indicator - slow stochastic oscillator indicator smooths out the price data used for the original calculation and it is used by many Forex traders. This slow stochastic indicator version is less prone to whipsaws compared to the fast stochastic version.

For the slow stochastic indicator. A 3 period moving average is used to smooth out the stochastic lines. The moving average is not that of the price action but of the stochastic oscillator indicator lines data.

Full Stochastic Oscillator Indicator

Full Stochastic Oscillator Indicator - this stochastic oscillator does not use a fixed moving average period, like the slow forex stochastic oscillator version above. Forex traders don’t want to use a fixed setting to calculate the stochastic forex trading indicator.

Because of this reason the full stochastic was developed by traders and it is more flexible than the earlier two forex stochastics oscillator versions.

Full stochastic oscillator indicator version allows traders to choose the period they want for the fast and slow forex stochastic indicator line.