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Stochastic Indicator Cross Over Signals

Analyzing and interpreting signals derived from the Stochastics Oscillator Technical indicator shares similarities with the moving average MA crossover approach. Within the Stochastic oscillator indicator itself, a crossover signal occurs when the %K and %D lines intersect. These crossover signals warrant careful evaluation, as they generate the highest incidence of whipsaws among the Stochastic oscillator signal interpretations discussed thus far. Whipsaws, or false signals, are particularly common when using the Fast Stochastic Oscillator variant.

Stochastic Oscillator Crossover Alerts:

  • For a Sell gold signal, a gold trader looks for % K line to move below the %D line.
  • For a Buy signal, a gold trader looks for the % K line to move above the %D line.

Due to the often unreliable nature of stochastic crossover signals from %K and %D, it is essential to corroborate them with additional technical indicators.

The Stochastics Centerline

The stochastic oscillator has a centerline at the 50% level on the stochastic technical indicator panel. This means there's an equal balance between buyers and sellers. When the stochastic indicator crosses this center-line, it can tell us whether buyers or sellers will start to take control of the price trend.

Stochastic Oscillator Center-line Cross-overs Signals

  • If the Stochastic oscillator indicator is staying below the center-mark (between 40%-50%) and crosses up, then it's an indication the trading bulls are taking control of the market.
  • If the Stochastic oscillator indicator is staying above the center-mark (around 50%-60%) & then crosses below the center line, it can be an indication that the trading bears have taken control of the market.

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