Stochastic Oscillators – To Profit or Not to Profit?

Stochastic oscillators are excellent tools for applying to your Forex trading arsenal. There are actually three different kinds of these oscillators–fast, slow, and full. Each has its own purpose and benefits, but most people do use the slow oscillators. These have the most practical application to Forex trading, and are of the most use to professional and beginning traders.

Slow stochastic oscillators operate on the principle that it is most likely to have currencies end a trading series at a high price when your financial analysis tools predict a high trend. Likewise, currencies close on a low price when financial tools predict a low trend. The oscillator itself is a financial tool, and it isn’t even a very high tech one. This particular tool is simply two lines that are drawn on a price tracking chart. The lines are drawn underneath the high and low ends of the currency series, and are usually called the %K and the %D lines.

The %K line indicates how strong the drive is for that currency in the marketplace. The %D line is the average (or mean) of the price indicators on the %K line. You chart your prices using whatever financial tool you prefer, and draw the oscillator lines in their appropriate positions according to market strength. When you do this, you can tell when there is overbuying and overselling in the marketplace, and can adjust your trading activities accordingly. The Forex market moves very quickly, so you will want to keep a close eye on trading changes and note trends as they are happening. This is the only way to profit, and an oscillator is just one of the many ways you can put yourself ahead of other traders in knowing when to buy and when to sell your currencies, and for what price. It’s practically a full time job watching everything, since Forex is so swift in its movements, but if you can catch things at just the right time, you can profit handsomely with this market.

Naturally, it will take some time and practice to learn how to properly use stochastic oscillators. You will need to be involved in Forex trading for a few months before you even begin to get a good idea of market trends, which is why it is always a good idea to do pretend trades on paper for a long time before you start to use any real money. That way, you can be sure you understand all of the various components of Forex trading, including the financial analysis tools that go into determining when to buy and sell. If you practice with these tools, including the oscillators, and do it regularly until you are comfortable with all of them, you have a much higher chance of profiting in this market than if you just jump in with no practice or experience at all.

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