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16.06.2019



AAKASHAYA PATRA SEVEN STAR SMART EDUCATION SERIES PART – 12 :
Stochastic Indicator

Stochastic is known as one of the reliable leading indicator to forecast the Price Reversal or Swing Reversal, its also give an idea about stock over bought position as well as stock over sold position
Stochastic Indicator does not follow price or volume but it follow momentum of the trend For ready reference,

Formula of the Stochastic Indicator as below :
% K = (Most Recent Closing Price - Lowest Low) / (Highest High - Lowest Low) × 100
%D = 3-day SMA of %K

Lowest Low = lowest low of the specified time period
Highest High = highest high of the specified time period

There is a two line are available in stochastic indicator, %K Line known as fast line and %D is known as slow line %D is known as a slow line because its a SMA of %K Default setting is 14 period it means it consider recent last 14 persod data as per formula in calculation We can use this Stochastic Indicator in any time frame like Intraday, Short Term, Medium Term and Long Term How to understand this Stochastic Indicator As we discussed, it consist of two line %K ( Fast Line) and % D (Slow Line)
When ever %K line crossed %D line from below to above its consider as a positive crossover and price may me reverse from this price zone towards upward direction and if %K Line crossed %D line from above to below its consider as a Negative Crossover where from that price zone,price may come down towards down wards direction.

As we discussed that Stochastic Indicator is a leading Indicator and it gives advance signal about price reversal or swing reversal, so its advisable to use exponential moving average as a legging indicator on the chart to refine our trade decision Combination of Leading and Legging Indicator gives much more better result as campair to use single leading indicator.

for more such type of education joint our online series and batches and be a pro trader contact on 7028 421 786.

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