Using the Stochastic Indicator we can define several simple and easy Trade Setups.
With the Ninjatrader Stochastics Indicator we can define Overbought and Oversold Bars when the K line is above or below these levels.
The D line is an average of the K line, so the closest is its period to 1, the closest this line will be with the K. With a period of 1, both lines overlap one each other.
We can use 2 different methods to trade with Stochastics ;
- Using both K and D lines ; we watch for Crossover of these lines, and take an entry depending where the crossover happened ; if it was on the overbought, we have a sell. If it was on the oversold, then it is a buy signal.
- Using only the K Line ; we wait for the K line being on the overbought/oversold area and trying to get out...
Watch this YouTube Video for more information