Developed by George C. Lane in the late 1950s, the Stochastic Oscillator is a momentum indicator that shows the location of the close relative to the high-low range over a set number of periods. Bullish and bearish divergences in the Stochastic Oscillator can be used to foreshadow reversals.
The default settings of the MT4 oscillator are 5,3,3. We prefer the 8,3,3 used in the dinapoli template that comes with MT4.
Our work on the THV coral inspired us to use coloring for a bullish, flat and bearish indication. The transition between the colors is adjustable via the Slope parameter. Think of this value as how steep the stoch has to be to be painted red or green.
Colors and style can be modified on the colors tab of the indicator editor. Please note that the color for bull and bear are dupliated ie 2 & 3 are bear, and 4 & 5 are bull. Please ensure you duplicate any color changes as shown.
The width and style can be altered as well. Numbers 1-5 should all be set the same width and style as they are all part of the main stochastic line. Experiment a bit and you will quickly find the best setup for yourself.