Stochastic

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Welcome to currency trading with Profiforex!
This video is devoted to Stochastic indicator.
In order to impose this indicator on the chart you should press "Indicators" button on the toolbar and choose "Oscillators" - "Stochastic Oscillator"

After doing that the window where we can change the indicators properties appears.Here we can choose two averaging periods--delay and the moving average method--which entry data the indicator will use, and can fix the maximum and minimum.Visual settings can be adjusted in the "Colors" tab.

Stochastic is one of the widely used indicators.

It's also the most helpful indicator if it's used as a psychological assistant.

In its calculation, Stochastics takes into account not only closing prices but also the lowest and  highest prices for the defined time period.That means that it contains much more information, than any other oscillator does.This indicator was elaborated in the 1950s by George S. Lane. Its calculation is as follows:whereK - Lane stochastic oscillator,C - the last closing price, L - the lowest level in the last "n" periods,H - the highest level in the last "n" periods.

Eventually, they began to smooth Stochastic twice.Initially, it was by the average length of %K (fast Stochastic),

and after that it was by %D (slow Stochastic). This is the three-period moving average of %K.

These strange titles occurred when traders elaborated formulas for oscillators,sequentially giving them titles %A, %B, %C, etcetera. Only three of them turned out to be functional: %K, %D and %R.

The first two lines are known as Lane stochastics, while the last is named after Larry Williams. We'll look at that in the next video.
Trading on the crossing of %K and %D is preferable.

However, it can be used only as the entry confirmation (more frequently in terms of psychologically). Also, their positions relative to each other can be used as an entry confirmation.