Stochastics Are Most Useful

Stochastics are most useful in measuring the strength of a trend and as augurs of a coming reversal in prices.
When prices are making new highs or lows and your stochastics are doing the same, you can be reasonably certain that the trend will continue. On the other hand, many traders finds that the best trading opportunity comes when their stochastic indicator is flattening out or moving in the opposite direction of prices. When these divergences occur, it's time to book profits and/or to establish a position in the opposite direction of the prior trend.

As should always be the case when using any technical tool, do not act on the first signal you see. Wait at least one or two trading sessions for confirmation of what the study is indicating before you commit to a position.

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