Usage of the Stochastic Indicator
The Stochastic indicator consists of two lines. The first line (%K, the green line) compares the current close price with the close price over a certain period of time. The other line (%D, the blue line) is the Moving Average of the %K line.
In a strategy, the simplest way to use the Stochastic indicator, is to open a Buy Position if the %K or the %D line rises above some predefined level (in general 20% is used), and open a Sell Position if the line falls below some predefined level (usually 80%).
Another way to use the indicator is to open a buy position if the %K rises above the %D line, and a Sell Position in the opposite situation.
