Stochastics are amongst the most popular technical indicators when it comes to Forex Trading. Unfortunately most traders use them incorrectly. In this article we will review the correct way to use this popular technical indicator.
George Lane developed this indicator in the late 1950s. Stochastics measure the current close relative to the range (high/low) over a set of periods.
Stochastics consist of two lines:
%K – Is the main line and is usually displayed as a solid line
%D – Is simply a moving average of the %K and is usually displayed as a dotted line