With this post, I continue the previous post on Stochastic Oscillator, this time I will describe in detail two ways to use the Stochastic Oscillator in trading operations.
In theory, using the Stochastic Oscillator is relatively simple, this because it works as an indicator of price action, hence its valuable utility when making decisions to open or close operations (buying or selling a cryptocurrency or any other financial instrument).
However, the ideal is to use the Stochastic Oscillator in conjunction with other indicators, namely; volume, exponential moving averages, among other indicators of equal or greater technical scope.
Moments of SELLING
One way to use the Stochastic Oscillator in a trading operation, is when we are in possession of equis amount of a certain cryptocurrency, or any other financial instrument, and after a series of bullish impulses are generated consecutive readings of high impulses in the Stochastic Oscillator with bearish crossover, and subsequent entry into range within the scale, behavior that we can interpret on the chart as a signal of Over-Buy, so, opening a SELL operation will represent an option to take profits.
Another way to use the Stochastic Oscillator in a trading operation, is when a certain cryptocurrency, or any other financial instrument is in constant depreciation with contrastable action in charts with bearish trends, so, when the Stochastic Oscillator reaches the lowest area, and then enters the range within the scale, this action can be interpreted as a signal of Oversold, so, opening a BUY operation will represent an investment option.
One point to note is that, as with the rest of the indicators, it is advisable to use the Stochastic Oscillator in combination with other technical indicators, in order to get a better view of the price action.
SOURCES CONSULTED
➊ Ng Ee Hwa Trading strategies using Stochastic. Link