USING THE STOCHASTIC OSCILLATOR 12th February 2015

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Judith Willis
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1 TAFX USING THE STOCHASTIC OSCILLATOR 12th February 2015

2 Disclaimer is in no way affiliated or representative of any other company, organisation, club or society, and the views presented are solely our own opinions. The author(s) is not a licensed investment advisor. Our services are educational tools designed to assist you in your personal judgment. It is not designed to replace your licensed financial consultant, and nothing in the content shall be construed to be an offer or solicitation for the purchase or sale of a security. All content on our website and related services is for informational purposes only, and opinions have been made on a general basis. No consideration has been given to any particular individual or specific investment objectives, financial situations or other circumstances. As such, the content should not be relied upon as authoritative without further being subject to the recipient s own independent verification and exercise of judgment. The fact that the content has been made available constitutes neither a recommendation to enter into a particular transaction nor a representation that any product described within is suitable or appropriate for the reader. Readers should be aware that many of the products which may be described within involve significant risks and may not be suitable for all investors, and that any decision to enter into transactions involving such products should not be made unless all such risks are understood and an independent determination has been made that such transactions would be appropriate.

3 Agenda Introduction to Technical Indicators Introduction to the Stochastic Oscillator Using the Oscillator Limitations

4 Agenda Introduction to Technical Indicators Introduction to the Stochastic Oscillator Using the Oscillator Limitations

5 Introduction to Indicators What are they? Statistics used to: Forecast stock trends and price patterns Who uses them? Short-term traders Technical Indicators Long-term investors Entry/Exit Why use them? To provide confirmation for entry and exit points

6 Agenda Introduction to Technical Indicators Introduction to the Stochastic Oscillator Using the Stochastic Oscillator Limitations

7 Introduction to the Stochastic Oscillator What is it? Oscillator which follows momentum Momentum: Rate of rise/fall in prices When to use it? Best used in a market: Trending sideways With high volatility Why use it? It is a sensitive oscillator

8 Introduction to the Stochastic Oscillator Stochastic Oscillator Consists of: %K Line Shows you the location of the close price in a specified time period %D Line Moving average of %K within a time period (John Murphy)

9 Agenda Introduction to Technical Indicators Introduction to the Stochastic Oscillator Using the Oscillator Limitations

10 Using the Stochastic Oscillator Three ways to utilize the oscillator Make use of overbought/oversold region Look out for crossovers between %K and %D lines Make use of divergences Signals which satisfy all three conditions are the strongest

11 Using the Stochastic Oscillator Using Overbought and Oversold Regions

12 Using the Stochastic Oscillator Using the Overbought and Oversold Region Green area above 80 is considered Overbought Red area below 20 is considered Oversold

13 Using the Stochastic Oscillator Using the Overbought and Oversold Region Green area above 80 is considered Overbought High probability of price Red area below 20 is considered Oversold High probability of price

15 Using the Stochastic Oscillator Using Crossovers

16 Using the Stochastic Oscillator Using Crossovers between the %K and %D Lines 1. Identify crossover: A crossover is when: %K line crosses the %D line If the %K moves ABOVE the %D line, it s a BUY signal If %K moves BELOW the %D line, it s a SELL signal

17 Using the Stochastic Oscillator Using Crossovers between the %K and %D Lines 2. Take note if crossover is near/close to Overbought or Oversold region Crossovers near the Overbought and Oversold regions are strong signals

19 Using the Stochastic Oscillator Using Divergences

20 Using the Stochastic Oscillator Using Divergences What is a Divergence? When Price moves in a direction opposite of the Stochastic Oscillator

22 Agenda Introduction to Technical Indicators Introduction to the Stochastic Oscillator Using the Oscillator Limitations

23 Limitations False Signals Do not use the Stochastic Oscillator alone Instead, combine with other methods of analysis

24 Additional Information Stochastic Oscillator Strategies: Stochastic Pop and Drop StockCharts.com» ChartSchool» Trading Strategies and Models» Stochastic Pop and Drop In depth information on Stochastic Oscillator: Go to Stockcharts.com» ChartSchool» Technical Indicators and Overlays» Stochastic Oscillator

TRIPLE SCREEN TRADING AND BLOOMBERG INTRODUCTION

TAFX TRIPLE SCREEN TRADING AND BLOOMBERG INTRODUCTION Disclaimer is in no way affiliated or representative of any other company, organisation, club or society, and the views presented are solely our own