A:

Given the hundreds of indicators that are available to traders, finding the appropriate technical tools to use in day trading can be a difficult task. The good news is that the majority of indicators can be used in day trading simply by adjusting the number of time periods used in creating the indicator. Most traders are accustomed to seeing each indicator use each daily close as one period in the calculation, but they quickly forget that the interpretation remains the same whether the data used in one period is equal to a day, a minute, a week, a month or a quarter.

One indicator chosen by many traders is the fast or slow stochastic oscillator. (To learn more, see What is the difference between fast and slow stochastics?.) The slow stochastic is one of the most popular indicators used by day traders because it reduces the chance of entering a position based on a false signal. In general, a slow stochastic measures the relative position of the latest closing price to the high and low over the past 14 periods. When using this indicator, the main assumption is that the price of an asset will trade near the top of the range in an uptrend and near the bottom in a downtrend. This indicator is very effective when used by day traders, but one problem that may arise is that some charting services might not include it as an option on their charts. If this is the case for you, you may want to consider re-evaluating which charting service you use.

For more information on the stochastic indicator, see Getting To Know Oscillators - Part 3.

RELATED FAQS
  1. What is the difference between fast and slow stochastics in technical analysis?

    The main difference between fast and slow stochastics is summed up in one word: sensitivity. The fast stochastic is more ... Read Answer >>
  2. What are the best technical indicators to complement the Stochastic Oscillator?

    Explore the function of the stochastic oscillator indicator, and discover other technical indicators traders use to complement ... Read Answer >>
  3. How do I read and interpret an Stochastic Oscillator?

    Understand the basics of the stochastic oscillator and how analysts and traders use this measure of trend momentum to predicts ... Read Answer >>
  4. How can a business eliminate deadweight loss from government regulation?

    Understand the basics of the stochastic oscillator and how to use this momentum metric in tandem with other indicators to ... Read Answer >>
  5. How do I use Stochastic Oscillator to create a forex trading strategy?

    Learn about the stochastic oscillator and how to it is used to create an effective forex trade strategy, including how to ... Read Answer >>
  6. Why is the Stochastic Oscillator important for traders and analysts?

    Understand how and why analysts and traders consider the stochastic oscillator a useful tool for anticipating trend exhaustion ... Read Answer >>
Related Articles
  1. Trading

    Triple Screen Trading System - Part 5

    Stochastics can be very effective as the second screen in this three-part system. Find out how to use this popular oscillator.
  2. Investing

    Stochastics: An Accurate Buy And Sell Indicator

    Find out how stochastics are used to create buy and sell signals for traders.
  3. Trading

    Know the Forces At Play Behind the Buy/Sell Cycles

    Weekly Stochastics uncovers patterns of buying and selling pressure that can be predicted and capitalized upon by observant investors and traders.
  4. Trading

    Do You Have The Right Settings On Your Stochastic?

    Use these helpful tips to unlock Stochastics' full potential.
  5. Trading

    Combined Forces Power Forex Snap Strategy

    Stochastic and MACD oscillators can help isolate greater opportunities in range-bound markets.
  6. Trading

    Using Trading Indicators Effectively

    Select multiple indicators, avoid information overload and optimize indicators to effectively use technical analysis tools.
  7. Investing

    How to Use Trading Indicators Effectively

    Careful and effective use of technical indicators can improve your odds of finding an investment’s best entry and exit points.
  8. Trading

    How To Best Analyze Relative Strength

    Relative strength indicators measure performance between similar instruments, uncovering opportunities that can translate into reliable profits.
RELATED TERMS
  1. Williams %R

    In technical analysis, this is a momentum indicator measuring ...
  2. Indicator

    Indicators are statistics used to measure current conditions ...
  3. Demarker Indicator

    An indicator used in technical analysis that compares the most ...
  4. Confirmation

    The use of an additional indicator or indicators to substantiate ...
  5. Confirmation On A Chart

    An indicator or chart pattern that provides evidence that the ...
  6. Market Indicators

    A series of technical indicators used by traders to predict the ...
Hot Definitions
  1. Preferred Stock

    A class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shares ...
  2. Net Profit Margin

    Net Margin is the ratio of net profits to revenues for a company or business segment - typically expressed as a percentage ...
  3. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
  4. Current Ratio

    The current ratio is a liquidity ratio measuring a company's ability to pay short-term and long-term obligations, also known ...
  5. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
  6. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
Trading Center