How to use stochastic oscillator in forex

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How to use stochastic oscillator in forexHow to Use Stochastic Oscillator in Forex

The Stochastic Oscillator was created by George C. Lane and introduced to the trading community in the late 1950s. It was one of the first technical indicators used by analysts to provide insight into potential future market direction and is based on the premise that during a market uptrend, prices will remain equal to or above the previous period closing price. Alternatively, in a market downtrend, prices will likely remain equal to or below the previous closing price.

Using a scale to measure the degree of change between prices from one closing period to the next, the Stochastic Oscillator attempts to predict the probability for the continuation of the current direction trend. Traders look for signals generated by the actions of the stochastic lines as viewed on the stochastic scale.

Stochastic - A Greek word meaning "guess" or "random" that in this context, refers to the task of predicting a future state based on past actions.