George C. Lane is credited with creating stochastic oscillators more than 50 years ago. As a forex technical indicator it is a theory still in use today and one you might want to spend some forex training on. It is considered easy to read with clear sell and buy signals. There are three types of oscillators: fast, full, and slow. The most important variant of this concept is the “full” oscillator, thus the discussion below.
Forex Training Full Oscillation
This oscillator consists of two lines. As the full version it offers customisation choices. The two lines may criss-cross or they may move back and forth. This is within a number range of 0 to 100. The lines are called %K and %D. %K tends to be the leader in this scenario because it will change direction or move first before %D. During your forex training consider K as the leader with D as the follower. When you examine the full oscillator bear in mind its relationship is based on the market closing price to the trading range from the past.
When the price closes at the top of the range, it is implied that %K will move higher. If it is towards the bottom %K is going to move lower. Typically you use the line movements as indicators to enter or exit from your current trade. If you do not like using it this way, in terms of buying or selling, you can consider it on momentum. You want to look for %K that is above 80 or below 20. These two numbers indicate the market is either overbought or oversold, respectively. Forex training should tell you not to get into a market that is over-sold or bought. If you just use the full oscillators to look for this concept you will have an idea of whether the market is worthy of buying into.
Forex Training Signals for Oscillators
Full oscillators have two factors you should learn. The first is reversals where the %K is entering or exiting the upper or lower reversal zones. There is also the divergences with the %K diverging from the price action.
To bring this concept home to you just remember 80 to 100 is the upper reversal zone, and 0 to 20 is the lower reversal zone. If the %K gets out of either of these ranges it is a time to buy. You have to be careful in your forex training looking for the %K and %D, in which the %K crosses over the %D. If there is a crossover it would mean an exit signal rather than an entry signal.
When there is a divergence it means the currency pair price could be moving differently than the %K and %D. In this concept the same exit appears in the signal meaning the %K will cross over the %D.
Keep in mind during your forex training that the stochastic oscillator is a lagging one. It means the rates or prices you see are trailing from the past. You are looking at past data, which means there is no future guarantee.