The best crossover is when the %K line intersects after the peak of the %D line (known as a right-hand crossover).

3. Stochastic Divergences

Divergences between the stochastic and the underlying price trend also offer good signals to trade and are a great leading indicator for entering positions.

If prices are making a series of new highs and the stochastic is moves lower or crosses then you have a warning sign that price momentum is weakening and a top may be at hand and vice versa in a bear market.

Combining the Stochastic With Other Indicators

The stochastic is probably the best momentum indicator and can work with just support and resistance on your forex charts. It can also be combined with other momentum indicators to filter false signals and the Relative Strength Index is ideal for this.

If you want to improve your forex trading strategy and time you’re trading signals with great accuracy, take a look at the stochastic indicator and you will improve your chances of currency trading success.

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