The strategy built up in FxMath EA only uses Stochastic Indicator to determine the Entry and Exit points, it compares between different stochastic values to detect the major trends in the market to enter it, while the end of trend by comparing between two stochastic values.
It was developed by George C. Lane in the late 1950's, it's a momentum indicator that can reveal the location of the close relative to the high-low range over a set number of periods. According to an interview with Lane, the Stochastic Oscillator;
doesn't follow price, it doesn't follow volume or anything like that. It follows the speed or the momentum of price. As a rule, the momentum changes direction before price.
So that the ascendant and descendant deviations in the Stochastic Oscillator can be used to indicate reversals. This was the primer, and most important, signal identified by Lane, that can also be used to identify bull and bear set-ups to predict a future reversal and as it is range bound, it can also be used to identify overbought and oversold levels.
%K = (Current Close - Lowest Low)/(Highest High - Lowest Low) * 100 %D = 3-day SMA of %K Lowest Low = lowest low for the look-back period Highest High = highest high for the look-back period %K is multiplied by 100 to move the decimal point two places