Best Trading Indicator? — The Stochastic. Great tips on using this powerful tool!

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Best Trading Indicator? — The Stochastic. Great tips on using this powerful tool! – Check here to read our article – http://www.tradingandinvesting4u.com/best-trading-indicator-%E2%80%93-the-stochastic-great-tips-on-using-this-powerful-tool/

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Best Trading Indicator? — The Stochastic. Great tips on using this powerful tool!
In this video I want to step back a little from the charts and look at a different kind of analysis for when we use indicators. We all know there are many, many indicators we can look at while viewing trades, but when we actually look at getting into the market, half of them can be saying to get in the trade and the other half says not to!!
So, today I just want to go over one of the best trading indicator that I use and that is the Stochastic. I am going to give you an overview of how I use it, so you can take away some more tips and hopefully stack the odds in your favor.
Let’s have a look at a daily chart now — it doesn’t matter what kind of stock, it’s just a simple daily chart. Now, we have a slow stochastic, in this case a 14 over 3 but, it really doesn’t matter what period stochastic you have just make sure you test it out on the stock you are looking at. You can do some back testing and see what stochastic works best with the chart you are viewing. You will find as a trader that some period stochastic works well with some stocks and some don’t. In this example we will stick with a 14 period and a 3 smoothing and as usual we will stick with a bullish zone of 80 and a bearish of 20. Now, I like to use the stochastic side by side with trends and turning points. In this example we have a stock in a nice uptrend. As the market was stair stepping up in this trend, remember peaks and troughs, watch what the stochastic did. When the stock took a stair step down the stochastic pulled back into the oversold area — remember the oversold section is below the 20 and the overbought is above the 80 line. So, we can see that when the market pulled back and the stochastic pulled below the 20, that period was a very good turning point. As we can see on the chart, the market moved higher.
Now, if I was looking at this stock and I can see it is in a very good uptrend this is how I would use it. Once I have identified that this stock is in an uptrend I would wait for a pullback and watch the stochastic. When the stochastic pulls back below the 20 oversold line I would consider getting in. If we look at the chart here, we can see that these turning points while using the stochastic as well are very powerful. On this chart, we can see that after this turning point, the stock moved into a sideways pattern and didn’t move beyond the 80 overbought or below the 20 oversold. Once it did move beyond the 80 overbought line it was giving us a warning that the stock was overbought and if we look what happened next we can see it had a sharp move down to below the 20 line. Again we could have used this point as a buying entry and if we follow the chart we can see the stock popped back up again quite nicely. If we follow this stock further we can see that every time the stock pulled back, the stochastic fell below the 20 oversold line and we could have used these periods as entry points.

Big Picture
So, as we can see this is one way we can look at using the stochastic for entry signals. We can wait for a nice up trending stock and as you can see from this example, when the stochastic pulls back below the 20 line we can seriously consider that a buy signal while if it went above the 80 line, we can look at it as a sell signal. Now again, we don’t want to base our trades off this alone. We also need to use other technical analysis like volume and support/resistance, trend lines etc. But, we can see that when used the stochastic can be a powerful tool and perhaps one of the best trading indicator I feel, for finding high probability turning point.

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