3 Types of Stock Indices Trading Stochastic Indicators

Fast, Slow and Full Stochastic

There are 3 types of Stock Indices Stochastic Indicators: fast, slow & full stochastic oscillator.

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 stock indices calculation of stochastic oscillator.

Stochastic oscillator technical indicator works based on the principle that:

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

Stochastic Oscillator indicator shows the strength of the Stock Indices trends, and identifies times when a stock indices is oversold or overbought.

Fast Stochastic Oscillator Indicator

Fast Stochastic Indicator - fast stochastic oscillator indicator plots 2 lines, one solid and one dotted on the indicator section. These two lines are called the %K line and %D line. In this versions the %K & %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 stock indices whipsaws when they get to the overbought and oversold levels. The fast stochastic lines are prone to fake stock signals/whipsaws.

Slow Stochastic Oscillator Indicator

Slow Stochastic Oscillator Stock Index Indicator - slow stochastic oscillator indicator smoothes out the price data used for the original calculation and it is used by many Stock 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 lines data.

Full Stochastic Oscillator Indicator

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

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

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