What kind of stochastics should be used in the chart?
Stochastics is an oscillator that shows overbought and oversold conditions.
There are three types of settings: fast, slow and full.
Fast Stochastics
%K is set to 3. This is the fast moving line in the indicator.
Slow Stochastics
%D is set to 3. This is the slow moving line in the indicator.
Full Stochastics
The full stochastics includes both %K settings, %D settings as well as the day period that the indicator takes into consideration (5-day, 10-day...)
The recommended full stochastics setting for swing trading is 12,3,3 (Period= 12, %K= 3, %D= 3)
The recommended full stochastics setting for day trading is 5,2,2 (Period= 5, %K= 2, %D= 2)
Please bear in mind that stochastics oscillator is a lagging indicator.
In addiiton stochastics only takes into consideration price and time. It does not include volume into its formula. Therefore it is an limited indicator.
Good trading!
Trading Risk Disclaimer