Page 65 - NEW FOREX FULL COURSE

FOREX TRADING COURSE FOR BEGINNERS

signals in uptrend and only the sell signals in bear markets. However, in a trading range market,
stochastic will give good buy and sell signals.

Buy and sell signals are shown on chart. With stock indexes in an overall up trending pattern, the
stochastic buy signal would have helped traders establish long positions on the buy signals in
November, December and March. The sell signals in February, June and July could have been
used to take profits on long positions.

Some traders prefer to see the %K line cross the %D line on the right side. This is called a right-
hand crossing. In other words, %K is crossing %D after %D has bottomed or topped. When the
%K crosses the %D line before the %D has bottomed or topped, it is referred to as left-hand
crossing. Of course, this can only be seen in hindsight because, at the time the two lines intersect,
you don't know if the %D has reached its ultimate top or bottom.

Left-hand crossings are not as common as right-hand crossings. You can see a left-hand crossing
on the S&P chart in early February. The %K dipped below the %D before the %D had reached its
ultimate peak. Stochastic is a very useful technical indicator which helps you with your timing,
especially when it is used in conjunction with the other trading tools.

AVERAGE DIRECTIONAL MOVEMENT INDEX

Although the average directional movement index (ADX) isn't used as frequently as some of the
popular technical indicators, the ADX line has definite advantages because it filters out a lot of
the false oscillator signals which are frequently given early in a move.

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