Stochastics Buy Signal
When the Stochastic is below the 20 oversold line and the %K line crosses over the %D line, buy.
Stochastics Sell Signal
When the Stochastic is above the 80 overbought line and the %K line crosses below the %D line, sell.
Stochastic Fast buy and sell signals are illustrated below in the chart of the E-mini S&P 500 Future:
Stochastic Slow is presented below in the chart of the E-mini Russell 2000 Futures contract. Notice how much smoother the %K and %D lines are and how many fewer false signals were given by the Stochastic Slow than were given by the Stochastic Fast indicator.
In addition to giving clear buy and sell signals, the Stochastic technical analysis indicator is also helpful in detecting price divergences and confirming trend.
