Forex Stochastic Oscillator Indicator
Forex Stochastic Oscillator Indicator compares where a security’s price closed relative to its price range over a given time period.
The Stochastic Oscillator is displayed as two lines. The main line is called %K. The second line, called %D, is a Moving Average of %K. The %K line is usually displayed as a solid line and the %D line is usually displayed as a dotted line.
There are several ways to interpret a Stochastic Oscillator. Three popular methods include:
- Buy when the Oscillator (either %K or %D) falls below a specific level (e.g., 20) and then rises above that level. Sell when the Oscillator rises above a specific level (e.g., 80) and then falls below that level;
- Buy when the %K line rises above the %D line and sell when the %K line falls below the %D line;
- Look for divergences. For instance: where prices are making a series of new highs and the Stochastic Oscillator is failing to surpass its previous highs.
Calculation
The Stochastic Oscillator has three variables:
- %K periods (Pk). This is the number of time periods used in %K calculation. By default is 5;
- %K Slowing Periods (Sk). This value controls the internal smoothing of %K. A value of 1 is considered a fast stochastic; a value of 3 is considered a slow stochastic. By default is 3;
- %D periods (Pd). This is the number of time periods used when calculating a moving average of %K. By default is 3;
The formula for %K is:
%K = 100*SUM (CLOSE – MIN (LOW, Pk), Sk) / SUM (MAX (HIGH, Pk) – MIN (LOW, Pk)), Sk)
Where:
- CLOSE — is today’s closing price;
- MIN (LOW, Pk) — is the lowest low in Pk periods;
- MAX (HIGH, Pk) — is the highest high in Pk periods;
- SUM (CLOSE – MIN (LOW, Pk), Sk) — amount composed CLOSE – MIN (LOW, Pk) for period Sk;
- SUM (MAX (HIGH, Pk) – MIN (LOW, Pk)), Sk) — amount composed HIGH (Pk)) – MIN (LOW, Pk) for period Sk.
The %D moving average is calculated according to the formula:
%D = SMA (%K, Pd)
where:
- Pd — is the smoothing period for %K;
- SMA — is the Simple Moving Average.
What does Forex Indicator mean?
A forex indicator is a statistical tool that currency traders use to make judgements about the direction of a currency pair’s price action. Forex indicators come in many types, including leading indicators, lagging indicators, confirming indicators and so on. Popular forex indicators include moving averages, relative strength index (RSI) and average true range (ATR). A forex trader must choose the indicators that fit his or her trading strategy.
How to install Forex Stochastic Oscillator Indicator?
- Download Forex Stochastic Oscillator Indicator.zip
- Copy mq4 and ex4 files to your Metatrader Directory / experts / indicators /
- Copy tpl file (Template) to your Metatrader Directory / templates /
- Start or restart your Metatrader Client
- Select Chart and Timeframe where you want to test your forex indicator
- Load indicator on your chart
How to uninstall Forex Stochastic Oscillator Indicator?
To shut down an indicator, one has to remove it from the chart. At that, its drawing and recalculation of its values will stop. To remove an indicator from the chart, one has to execute its context menu commands of “Delete Indicator” or “Delete Indicator Window”, or the chart context menu command of “Indicators List – Delete”.
