Few people talk about the Stochastic when the subject is technical analysis in cryptocurrencies. Still, this oscillator can be a powerful tool for identifying correction phases and entry and exit points.

In this article, we will understand how it works, what the main signals are, and how to avoid common pitfalls.

🔎 What is the Stochastic?

The Stochastic is an indicator that measures the current price position relative to the price range of a period.

Goes from 0 to 100.

Below 20 → oversold region.

Above 80 → overbought region.

It has two main lines:

%K (fast line)

%D (slow line, average of %K)

The secret is to observe the crossings of these lines in key areas.

📈 How to use in practice

✅ 1. Entry in an uptrend (exit from 20)

In a bull market, when the stochastic drops below 20 and then crosses upwards, it indicates that the correction may have ended.

Many traders use this signal as a buy entry, hoping that the main trend continues.

🎯 Practical example:

BTC rising on the daily chart → stochastic drops to 15 → %K crosses %D upwards → signal of a resumption of the rise.

✅ 2. Light correction after 80

In strong trends, the price often 'exceeds 80' and remains in the overbought region.

When a small crossover downwards occurs (light correction) and soon after the price resumes the rise, it may be another entry opportunity.

This signal is more conservative because it confirms that the correction was small and the trend remains strong.

⚠️ Warning: there is no 'certainty of profit'

A common mistake is to believe that the stochastic alone guarantees perfect entries. This is dangerous.

👉 The correct way is to use the stochastic as a trigger, but always in the context of analysis:

Major trend (H4, 1D).

Supports and resistances.

Moving averages (21, 50).

Volume following the movement.

✅ Quick usage checklist

Before trading based on the Stochastic, ask yourself:

Is the major trend clear?

Did the crossover occur in the 20 or 80 region?

Is there support/resistance or a moving average nearby confirming?

Is the volume following the signal?

If all answers are 'yes', the chance of the signal being reliable increases significantly.

🎯 Conclusion

The Stochastic is a powerful tool for surfing corrections in trends in the crypto market. It helps find entry points with a higher probability of success, as long as it is used alongside other elements of technical analysis.

Never trade believing in 100% guaranteed signals. The secret is to play with probabilities, always with risk management.

#TechnicalAnalysis #CryptoTrading #RiskManagement #BinanceHODLer