forextra: The word stochastic is derived from the Greek meaning “to guess” or “to aim.”
The term’s application in investment is to ‘guess at’ the likelihood of a continuing trend – the probability is expressed in percentage. Stochastic indicators are called ‘oscillators’ in the sense that they fluctuate somewhat rapidly up and down, in a wavelike manner, generating buy and sell signals.
Forex traders use many different types of stochastic indicators – every trader has his or her favourites. Most trading platforms will allow you to plug in more than thirty different choices.
But there are a few that…