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Stochastic indicator shows overbought and oversold on the Forex charts

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Stochastic is an indicator of Forex chart analysis that can be used to measure the end of a trend.

This indicator was invented by George Lane in the late 1950s. His first design was based on following the speed or momentum of the price, but it is now used to check for excessive buying or selling.

When you apply Stochastic to Forex trading, you can see excessive buying or selling. Stochastic is displayed from 0 to 100, and when the stochastic line exceeds 80, the excessive number of stochastic line goes down to 20, which is called excessive selling. The point here is that When the market is oversold, it should be bought. When excessive buying occurs, you have to sell it.

Overbought

As you can see in the chart above, we can see that the indicator is in an excess buying position.

Based on this information, you can guess the following situation.

Decrease after overbought

The price of the market that has maintained excessive buying for a long time can be seen to descend gradually.

This is a very basic stochastic, there are other stochastic methods and you can find out which method is right for you.


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