The slow stochastic is an oscillating indicator. Developed by George Lane , it can alert you to a shift of investor sentiment from bullish to bearish or vice versa. The slow stochastic can also alert you to when traders are becoming over-extended, which usually results in a trend reversal.
The slow stochastic is usually plotted below the price movement on a chart.
The following three aspects of the slow stochastic are worth your attention:
The slow stochastic consists of two lines–%K and %D – that oscillate in a range between 0 and 100.
If the closing price is near to the peak of historical closing prices, then the %K line (followed by the %D line) will rise.
If the closing price is near the bottom of the range of historical closing prices, the %K line (followed by the %D line) will move lower (see Figure 7 ).
Slow Stochastic Trading Signal
Entry signal – when %K dips below 80, you can sell knowing that investor sentiment is shifting from being bullish to bearish. When %K rises above 20, you can buy knowing that investor sentiment is shifting from being bearish to bullish.
Exit signal – when %K reverses direction after having risen above 20 or fallen below 80, and crosses over %D, you can sell knowing that investor sentiment is changing direction again.
Volume indicators provide a very different kind of indicator because, instead of relying solely on the price, they take volume into account. Prices tell you in which direction an investment is moving...
The Relative Strength Index (RSI) is an oscillator that measures a particular financial instrument's current relative strength compared to its own price history...
As their name suggests, oscillating indicators are indicators that move back and forth as prices rise and fall. Oscillating indicators can help you decide how strong...
Company fundamentals, such as the amount of money the companies earns and how efficiently they utilise their resources, drive the share and CFD markets...
Typically short-term, speculative trades are generally coupled to major market events such as central bank interest-rate decisions and company results.