QUICK INFO: Stochastic Oscillator is one of the basic and popular trading indicators. It is a 'momentum indicator' that defines relative high and low price levels. It is simple to understand and very useful to combine with other trading indicators.
Stochastic oscillator is one of the widely used indicators for Binary Options Trading. As the name implies, stochastic oscillator is a curve that is oscillating between two levels, which are 0 and 100. Stochastics is a momentum indicator which measures the divergence of a price in comparison to its price range over a predefined period of time. A 'period' number that is defining the stochastic curve (Example: stochastic period 14 or. stochastic period 50) determines how many 'candles' in the past the stochastic indicator uses to calculate the price divergence. Measurement is calculated based on the asset's high and low price during a given period of time, so this setting determines how fast the stochastic curve will oscillate between the levels of 0 and 100.
To be able to efficiently trade binary options one of the simple methods is to combine the Stochastic Oscillator with Bollinger Bands Indicator which gives another type of information about overbought and oversold conditions in combination with volatility. There is also the possibility to combine it with RSI Indicator and Directional Movement Index. However, for determining more precise entry positions based on manually defined reversal levels, it is advised to use the Fibonacci Indicator or manually drawn Support and Resistance Levels.
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