Stochastic Oscillator Bitcoin Trading Analysis and Stochastic Oscillator Bitcoin Trading Signals

Developed by George C. Lane

The Stochastic Oscillator is a momentum indicator - it shows the relation between the current closing btcusd price relative to the high and low range over a given number of n periods. The Oscillator uses a scale of 0-100 to draw its values.

This Oscillator is based on the theory that in an up bitcoin trend market the btcusd price closes near the high of the btcusd price range and in a downward trending market the btcusd price will close near the low of the btcusd price range.

The Stochastic Lines are drawn as 2 lines- %K and %D.

• Fast line %K is the main
• Slow line %D is the signal

3 Types of Stochastics: Fast, Slow and Full

There are 3 types are: fast, slow and full Stochastic. The three indicators look at a given chart period for example the 14-day period, and measures how the btcusd price of today’s close compares to the high/low range of the time period that is being used to calculate the stochastic.

This oscillator works on the principle that:

• In an upward bitcoin trend, btcusd price tends to close at the high of the candlestick.
• In a downward bitcoin trend, btcusd price tends to close at the low of the candlestick.

This btcusd indicator shows the momentum of the Bitcoin trends, and identifies the times when a market is overbought or oversold.

Bitcoin Trading Analysis and Generating Bitcoin Trading Signals

The most common techniques used for technical analysis of Stochastic Oscillators to generate cryptocurrency signals are crossovers signals, divergence signals and overbought oversold levels. The following are the methods used for generating trade signals

Crossover Signals

Buy signal- %K line crosses above the %D line (both lines moving up)

Sell signal- %K line crosses below the %D line (both lines moving down)

50-level Crossover:

Buy signal - when stochastic lines cross above 50 a buy cryptocurrency signal is generated.

Sell signal - when stochastic lines cross below 50 a sell cryptocurrency signal is generated.

Divergence Bitcoin Trading

Stochastic is also used to look for divergences between this indicator and the bitcoin price.

This is used to determine potential bitcoin trend reversal cryptocurrency signals.

Upward/rising bitcoin trend reversal - identified by a classic bearish divergence

Bitcoin Trend reversal - identified by a classic bearish divergence

Downward/descending bitcoin trend reversal - identified by a classic bullish divergence

Bitcoin Trend reversal - identified by a classic bullish divergence

Overbought/Oversold Levels

Stochastic is mainly used to identify potential overbought and oversold conditions in btcusd price movements.

• Overbought values greater than 70 level - A sell cryptocurrency signal occurs when the oscillator rises above 70% and then falls below this level.

Overbought - Values Greater 70

• Oversold values less than 30 level - a buy cryptocurrency signal is generated when the oscillator goes below 30% and then rises above this level.

Oversold - Values Less Than 30

Trades are generated when the Stochastic Oscillator crosses these levels. However, overbought/oversold levels are prone to whipsaws especially when the btcusd trading market is trending upwards or downwards.