Stochastic Technical Indicator Overbought & Over-sold Levels
Stochastic oscillator trading is used to look for over-bought/oversold signals. Overbought levels are above 80% level & oversold levels are below 20 % level.
The key is to not only look at Stochastic oscillator trading when the %K or %D lines touch or crossover-bought/oversold, but also when they cross over and back through these levels.
Just as with other gold trading momentum indicators such as RSI indicator the Stochastic oscillator indicator can stay inside the overbought & oversold levels for some time. When this gold trading stochastic indicator stays within these levels for a long time it indicates strong upward gold trend (overbought) or strong downward gold trend (oversold).
When the stochastic lines cross back below or above these overbought and over-sold levels it is usually a good indication of an upcoming trend reversal.
A trader can look for further signals to make the over-sold or over-bought levels more reliable if:
Buy XAUUSD Signal Using Stochastic Oscillator Technical Oversold Levels
- Before Buying, the %K & %D lines turn upward from below 5 %.
- A reading that is floating near 5% means that gold trading bears are in control and there is selling of gold. A trader should wait for the Stochastic Oscillator Technical Indicator to move back above 5% as a sign that the selling pressure is easing.
Buy trade signal is confirmed when the stochastic oscillator moves above over-sold, then after a while returns to oversold but this time moves up immediately without staying at the over-sold.
Buy Trade Signal Using Stochastic Oscillator Indicator Over-sold Levels
Sell XAUUSD Signal Using Stochastic Oscillator Technical Overbought Levels
- Before Selling, the %K & %D lines turn down from above 95 %.
- A reading that is floating above 95% means that gold trading bulls are in control and there is buying of gold. A trader should wait for the Stochastic to move below 95% as a sign that the buying pressure is easing.
- The sell trading signal is confirmed when the stochastic moves below over-bought, then after a while returns to overbought but this times moves downwards immediately without staying at the over-bought.
Sell Trading Signal Using Stochastic Oscillator Technical Overbought Levels
Looking at different chart time frames when using oversold and overbought levels can also help to determine the correct entry strategy when opening a trade position.
The main theory is to trade with the xauusd market trend. Always double check the trading signals with the longer term stochastic indicators to confirm gold trading signals on the shorter xauusd chart time frame periods.
Study More Lessons & Topics:
- Learn MetaTrader 4 XAU USD Platform Software Tutorial Course
- How Can I Trade XAU USD Candlesticks Patterns?
- Kase Peak Oscillator Gold Indicator & Kase DevStop 2 XAU USD Indicator Analysis
- Darvas Box Gold Indicator Analysis in Trading Charts
- How to Set & Place Buy Limit Pending Trade Order on MetaTrader 5
