Technical Trading Tips and Techniques by 
Many readers of my Chart of the Day analysis notice that I primarily use the Slow Stochastics as my confirming oscillator of choice. Why? From my experience, this particular oscillator provides reliable indications of momentum and overbought/oversold conditions, especially during ranging markets. Do other oscillators do similar things? Absolutely. But each trader/analyst does his/her own experimentation to find what personally works best and is most comfortable and intuitive to use. A long time ago, I settled upon the Slow Stochastics as one of my primary confirming oscillators, but this doesn’t mean that things won’t change in the future.
The Stochastics oscillators comes in several different flavors – fast, slow, and full. Whichever variety is chosen, the purpose is similar to other oscillators – identify momentum and overbought/oversold conditions, as well as to provide divergence signals. The mathematical formula for Stochastics compares the currency pair’s closing price to its price range over a set period of time. Because Stochastics has two lines as opposed to other oscillators’ (like RSI’s) one line, Stochastics can give off an additional signal that results when the %K line crosses the %D line. Slow Stochastics is a smoothed version of Fast Stochastics.
- James
James Chen is the Chief Technical Analyst at FX Solutions, a leading Forex broker. He is also a registered Commodity Trading Advisor (CTA) and a Chartered Market Technician (CMT) Level 3 candidate. At FX Solutions, Mr. Chen writes daily currency analysis, conducts forex trading seminars, and has authored numerous articles on currency trading and technical analysis for major financial publications. His upcoming book, Essentials of Foreign Exchange Trading
Hi Mr.Chen,
May I know what is the settings of your Slow Stoch (K, D, x). Is it fixed when u use it to analyze the market with different time frames. Kindly advise.
Thank you.
Cheers,
Rey
Hi Rey!
I usually use the settings of 14,3,3 for my Slow Stochastics. And I usually keep it constant for all timeframes, although I am usually looking at daily charts. Thanks for visiting, Rey!
James Chen