Stochastic Oscillator
Another one of the oscillators we use to interpret graphs and predict the trend is stochastic oscillator. This has two lines, which compares the current price of the asset on the maximum price and minimum closing a specific period, expressed as a percent.
The two lines are called K and D and are calculated as a period when established:
% K = (Current CloseLowest Low) / (Highest HighLow below) x 100
% D = 3 Simple Moving Average periods of% K.
Are often set a minimum of 14 periods and the highest value is the highest of all of these periods, the lowest of all the minor and D is calculated every 3 periods.
Interpretation of a stochastic oscillator
When this oscillator values above 80% is assumed that the market is overbought and there will be a trend change to the downside. If less than 20% then the market is oversold and there may be a change but upward trend. This is an indicator that gives you quite reliably, especially to analyze currencies.
If we are in a rising trend when we must look oversold indicators and if we are in a time of downward trend, overbought indicators, ignoring the rest to interpret graphs correctly.
