Stochastic Slow is presented below in the chart of the E-mini Russell 2000 Futures stochastics momentum indicator forex. D lines are and how many fewer false signals were given by the Stochastic Slow than were given by the Stochastic Fast indicator.
The Stochastic technical analysis indicator might be helpful in detecting price divergences and confirming trend. This is discussed on the next page. The information above is for informational and entertainment purposes only and does not constitute trading advice or a solicitation to buy or sell any stock, option, future, commodity, or forex product. Past performance is not necessarily an indication of future performance. The Momentum indicator compares where the current price is in relation to where the price was in the past. How far in the past the comparison is made is up to the technical analysis trader. Hence, if the current price is higher than the price in the past, then the Momentum indicator is positive.
In contrast, when the current price is lower than the price in the past, then the Momentum indicator is negative. Potential buy or shortsell entries are shown above in the chart. Momentum Potential Buy Signal When the Momentum indicator crosses above the zero line. Momentum Potential Sell Signal Momentum indicator crosses below the zero line. A cross of the zero line can generally mean two things: the future, currency pair, or stock’s price has topped out and is reversing or that the price has broken below recent lows, either way, these events are often interpreted by traders as bearish signals. Momentum Potential Exit Signals Generally speaking the potential buy and sell signals discussed above are poor exits, either selling out of a long position or buying to cover a short position. By the time the Momentum indicator returns back to the zero line, most or all of the profits have probably eroded, or even worse the trader has let a winning position turn into a losing position.
When the Momentum is reversing course and is heading back towards the zero line, that means profits have been eroded. How much of a retracement back towards the zero line before an exit is triggered is up to the trader. Like most technical analysis indicators, interpreting them is part science, part art form. Potential buy and sell signals are not the only use of the Momentum indicator. The next page discusses using Momentum to detect divergences, an important trading concept.