Signals are produced due to asset’s overbuying or overselling. This may occur due to a reversal in the fall, and oversold – because of a turn in the rise. Traders use the stochastic oscillator to find out those situations when it is necessary to leave the market before the trend changes.They also use it to enter the market, together with the start of a new trend.
By using such an indicator the steady growth of the market closing price endeavors to new highs. If the market moves in an upwards or sideways direction and closing prices are low – it indicates a weakening trend and the beginning of a market reversal.
In a bearish market the closing price on the contrary comes closer to the lowest price, but if they start to grow by the end of the trading session we can expect a reversal trend. Thus we receive information about the impending turn of the market.
How to trade binary options with Stochastic Oscillator?