====== Forex - Indicators - Stochastic ======

Stochastic is designating a process having an infinite progression of jointly distributed random variables.

The Stochastic Oscillator Technical Indicator compares where a security’s price closed relative to its price range over a given time period.

The Stochastic Oscillator is displayed as two lines.

  - The main line is called "%K."
  - The second line, called "%D," is a moving average of %K.

The %K line is usually displayed as a solid line and the %D line is usually displayed as a dotted line.

There are several ways to interpret a Stochastic Oscillator. Three popular methods include:
 
  * Buy when the Oscillator (either %K or %D) falls below a specific level (e.g., 20) and then rises above that level.
  * Sell when the Oscillator rises above a specific level (e.g., 80) and then falls below that level.

  * Buy when the %K line rises above the %D line and sell when the %K line falls below the %D line.
  * Look for divergences. For example, where prices are making a series of new highs and the Stochastic Oscillator is failing to surpass its previous highs.

----

===== How to use =====

This is confirmation indicator and acts as a filter, or confirmation for some other signal, and filter to filter false signals.

<WRAP info>
**NOTE:**  The main signals (from some other indicators) may not come in simultaneously with the Stochastic.

  * For this reason, it is important to check different possible signals from the Stochastic indicator to use it for trading, such as
    * Fast Stochastic:  34/5/5
    * Medium Stochastic:  55/8/8
    * Slow Stochastic:  100/8/8

  * and potentially use rules such as this for a buy:
    * Slow Stochastic (main line) on bar #1 is below 20.
    * Fast Stochastic on bar #1 is below 50.
    * Medium Stochastic on bar #2 is below 20.
    * Medium Stochastic on bar #1 is above 20.
    * Medium Stochastic main line on bar #1 is above Medium Stochastic signal line on same bar #1.
    * Medium Stochastic main line on bar 2 < Medium Stochastic main line bar #1.
  * and the opposite for a sell.


Thus, the most usual rules/signals (most usually used) for this indicator are the following:

  * main line of indicator is above or below some level indicating overbought/oversold.

or

  * main and signal lines are started to move to our direction.

or

  *  main line of indicator is above or below 50.

</WRAP>




The main line is above some level (50%, 70% or 80%):

  * as a confirmation for sell trade - for trend following system
  * as a confirmation for buy trade - for breakout systems (breaking support/resistance levels)


The main line is below some level (50%, 30% or 20%):

  * as a confirmation for buy trade - for trend following system
  * as a confirmation for sell trade - for breakout systems (breaking support/resistance levels)






----

====== References ======

https://www.metatrader5.com/en/terminal/help/indicators/oscillators/so

https://www.mql5.com/en/docs/standardlibrary/expertclasses/csignal/signal_stochastic