Fantastic Stochastics: The stochastic indicator explained simply. // stochastic oscillator trading strategy, stochastic indicator strategy, stochastic indicator tutorial, stochastics explained, stochastics tutorial, stochastics strategy, stochastics secrets, stochastics indicator, stochastics trading, stochastics momentum indicator, stochastic oscillator, stochastic momentum index, stochastic indicator settings, stochastic momentum indicator, stochastic rsi, stochastics divergence, stochastics forex david moadel
David Moadel today I wanted to give you
an introduction to the stochastic
indicator and it could be an indicator
that might tell you or at least at least
give you an indication of when you might
consider buying a stock and also when
you might want to sell it so let's take
a look
this is an example of the stochastic
indicator and the black line is the
stochastic line
ok and the red line is the three day
moving average of the black line and so
if the black line is a little too choppy
for you might be a little confusing the
red line is kind of a smooth out version
of the black line but mainly I focus on
on the black line the stochastic line
and it's an overbought and oversold
indicator ok and so if this bottom line
here represents 0 and the line never
goes below zero this top line represents
a hundred and it never goes above a
hundred alright
this dotted line is 50 that's the
midline and that means that the price is
you know about average where it normally
would be
this is 20 and that represents oversold
so if the black line goes below 20 or
this line that means that the stock is
possibly cheap and worth buying because
you want to buy it a low price of course
this line over here is 80 and that
represents overbought which means that
if the black line goes above this line
here that means the stock might be
expensive
ok and so you might not want to buy it
if it's overbought and if you already
own it you might consider selling if it
goes up above selling your shares if it
goes above that line all right now what
a lot of people do is they don't buy
right when the black line goes below 20
into oversold territory they don't buy
immediately they wait until it goes into
oversold
territory or below 20 and then they wait
until it goes back up
out of oversold territory in other words
when it comes back up above 20 that's
when they buy ok and so let's take a
look at some examples this is sprint
this is the daily candlestick chart and
i'm using stockcharts.com
which is a free website with the stock
charts and now as you can see
stochastics are not always the most
exciting indicator that you might go
months without a buy signal
ok and so you have to have a lot of
patience sometimes for first castex but
as you can see it in the on this chart
one time it went you know the black line
went into oversold territory and then if
you had bought right when it popped back
up or crossed above the oversold line
you know if it went back up above 20 if
you had bought there you would have
enjoyed a really big run-up he would
have done really well and some people
that they might sell their shares when
it now the line goes above 80 into
overbought territory you can do that or
you can hold on for longer in this case
you you would have wanted to hold on for
longer for sure this is best buy and in
all this time there are only two buy
signals but if you had to use if you had
used the signals you would have done
well the black line went into
over sold territory then popped back up
out of oversold territory right here and
if you had bought then you would have
enjoyed and held you would have enjoyed
a really nice run-up and here's another
recently there was another you know went
down into oversold and back up above 20
and then if you had bought right there
it might be too early to tell but so far
it seems to be going up so it seems to
be doing well here's panera bread and we
have three buys possible by signals here
it went into overbought territory here
but again this is an example of how you
don't necessarily want to buy right when
it goes into overbought territory
because it can stay in overbought
territory for a long time and you could
have a lot of downward price action
during that time so it came up above
k out of overbought right here if you
have back there you would have enjoyed a
run up here and then it went below and
above here again
and if you had bought right there you
would have enjoyed a sizable run up
there and then here's another one
it went below and then back up above 20
here and if you had thought they're so
far it's a decent run up
ok so those are just a few examples to
consider don't let anyone in decatur
tell you what to do when to buy or you
know when not to buy it's just one
indicator of many that you can look at
to help you make decisions so if you
like this video please give it give this
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questions or are you just want to put
together trading plan which you
definitely should have you can email me
anytime at David Modell @ gmail.com
thank you so much for watching and I'll
talk to you soon