Stochastic Oscillator emphasizes the equilibrium of buy and sell activities within the market. It anticipates reversals in trends as it indicates whether the stock or a currency is either overbought or oversold in the market. A market indicating an oversold or overbought level is ripe for a reversal. Most of the time, the condition of the trend remains for an extended period with Stochastic remaining on the overbought or oversold levels before a reversal occurs especially when it is based on a longer term time period. On a shorter term basis, prices are more sensitive to stochastics when it reaches overbought or oversold levels.

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