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Stochastic in Hiding. BEWARE THE “OOPS!”
The Stochastic is crossing up nicely through the Oversold 20 line (red) at point 1 in the chart on the left.
The price SHOULD follow the uptrend…
However, the Stochastic is an indicator, derived FROM the price action.
THE STOCHASTIC DOES NOT MAKE THE PRICE DO ANYTHING!
RATHER, PRICE DRIVES THE STOCHASTIC.
PRICE WILL DO WHAT IT WILL DO!
So why do we value the stochastic indicator? Because it USUALLY suggests a near-term increase in price action as shown at Point 2!
The LESSON? Beware the “Oops!” Protect yourself with adequate Money Management:
Always use Stops!
Never commit more than you can afford to lose on a trade.
Trade from a PLAN of your own making.
Follow your plan!