Hi Trader,

Today, I want to talk about using oscillators to help you make a trade.

You see, as valuable as moving averages are as filters to help determine the trend and though they are useful in confirming turning points for entry they still are still lagging indicators. That means that they are a little slow to show the changes in price compared to the speed of change in price itself.

One way, we get around that is to use a technical indicator like stochastics. Stochastics tracks price movement and where price closes for a particular time frame to get an indication of price change.

This indicator is set up so that any time you see price below 20 it is supposed to indicate that price is oversold and expect price to change course and reverse to the upside. Likewise, when stochastics is over 80 it indicates that price is overbought and expect a change in direction to the downside.

This helps us when the moving averages on a short term basis begin to go flat and indicate to us that a trading range is in place for price. Stochastics help us determine when price is oversold or overbought to help us profit.

However, if moving averages are in proper sequence(10, 30, 200) and have ?sunlight? or space between them then stochastics won?t be very effective. That?s because indicator is not that effective in strong trending environments because price can stay overbought or oversold for longs periods of time.

You now understand how to use this indicator to trade better than 95% of the traders out there, guaranteed.

But there are even more powerful setups and methods to use this often misunderstood indicator even in strongly trending markets. In the newsletters to come we?ll explore a few of them and in a report I am working on I?ll detail the most powerful combinations of using stochastics with some unique setups that almost guarantee a high percentage of winners with losers just being a fraction of what you can profit.

Take care.

Good Trading,

Billy W. www.stockoptiontrading.com

3828 West Davis Ste. 308-108 Conroe, TX 77304