Our custom developed Forex Stochastic Divergence Indicator. A stochastic oscillator is a momentum indicator comparing a particular closing price of a security to a range of its prices over a certain period of time. The sensitivity of the oscillator to market movements is reducible by adjusting that time period or by taking a moving average of the result. It is used to generate overbought and oversold trading signals, utilizing a 0-100 bounded range of values.
- A stochastic oscillator is a popular technical indicator for generating overbought and oversold signals.
- It was developed in the 1950s and is still in wide use to this day.
- Stochastic oscillators are sensitive to momentum rather than absolute price.
What Does The Stochastic Oscillator Tell You?
The stochastic oscillator is range-bound, meaning it is always between 0 and 100. This makes it a useful indicator of overbought and oversold conditions. Traditionally, readings over 80 are considered in the overbought range, and readings under 20 are considered oversold. However, these are not always indicative of impending reversal; very strong trends can maintain overbought or oversold conditions for an extended period. Instead, traders should look to changes in the stochastic oscillator for clues about future trend shifts.
Feel free to use this indicator together with our other technical indicators (oscillators, momentum) or price action methods to maximize your trading accuracy.
The EUR/GBP 15 minute chart below displays the Forex Stochastic Divergence Indicator in action.
Copy and paste the Forex Stochastic Divergence Indicator into the MQL4 indicators folder of the Metatrader 4 trading platform.
You can access this folder from the top menu as follows:
File > Open Data Folder > MQL4 > Indicators (paste here)
How to remove Indicator from your Metatrader Chart?
- Select the Chart where is the Indicator running in your Metatrader 4 Client
- Right click into the Chart
- “Indicators list”
- Select the Indicator and delete