# Steemit Crypto Academy Season 3 Week 7 | Homework for Professor @lenonmc21 | Analysis and Trading with the indicators "Stochastic Oscillator +" Parabolic Sar "

Hello everyone. I am well, and I hope you are too. This post is my assignment in response to Professor @Lenonmc21’s assignment on Analysis and Trading with the indicators "Stochastic Oscillator +" Parabolic Sar ". This lecture was full of insight as usual and very educative. I was granted the opportunity to learn new trading indicators, their applications, and their essence. I thank Professor @lenonmc21 once again for this class.

The assignment was given as follows:

Theory (No images)

- Define in your own words what is the Stochastic Oscillator?
- Explain and define all components of the stochastic oscillator (% k line,% D line + overbought and oversold limits).
- Briefly describe at least 2 ways to use the Stochastic Oscillator in a trade.
- Define in your own words what is Parabolic Sar?
- Explain in detail what the price must do for the Parabolic Sar to change from bullish to bearish direction and vice versa.
- Briefly describe at least 2 ways to use Parabolic Sar in a trade?
Practice (Only Use your own images)

- It shows a step by step on how to add the Stochastic Oscillator to the chart (Indicating the% k Line and the% D Line, the overbought and oversold zone.
- Show step by step how to add Parabolic Sar to the chart and how it looks in an uptrend and in a downtrend.
- Add the two indicators (Stochastic Oscillator + Parabolic Sar) and simulate a trade in the same trading view, on how a trade would be taken.

### Define in your own words what is the Stochastic Oscillator?

The Stochastic Oscillator is a technical trading indicator that is utilized for determining the performance of an asset on the markets and was invented by George Lane. The Stochastic Oscillator is mainly used to assess how momentous a stock's price trend is on the markets. The Stochastic Indicator computes the momentum of the asset by considering the closing price point of the stock and its "lookbacks" or the maximum and minimum price points in a given time.

### Explain and define all components of the stochastic oscillator ![2gsjgna1uruv8X2R8t7XDv5HGXyHWCCu4rKmbB5pmEzjYSjmNF1WH9xVAGsyREWRYvixG1GXQjiVpG5u3nTqgkrV8rXkXwkxZGAQrxbby1dkstsNwx.png](https://cdn.steemitimages.com/DQmXbSKXJre1qKskDxZJSv2CtLLmPD99sJns43GSBJBoMcj/2gsjgna1uruv8X2R8t7XDv5HGXyHWCCu4rKmbB5pmEzjYSjmNF1WH9xVAGsyREWRYvixG1GXQjiVpG5u3nTqgkrV8rXkXwkxZGAQrxbby1dkstsNwx.png)

**%K**and

**%D**.

**%K line**, which is by default represented with a blue color line, is a representation of the comparison between the minimum and the maximum price range of a financial asset on the market within a specific duration of time, and the current closing price of the asset in the form of percentages. The %K line is fast and drawn progressively based on a Mathematical computation as indicated in the formula below:

**%K Line = (The Recent Close Price – The Minimum Price of the Selected Time range) / (The Maximum Price of the Selected Time range - The Minimum Price of the Selected Time range)**

**%D line**, with a default red color, is regarded as a progressive mean of %K. It utilizes the recent three values of %K to develop the moving mean of the “fast Stochastic” or %K line. The %D line, on the other hand, is referred to as the “Slow Stochastic” because it has a low sensitivity to the change in the price of an asset on the market. This is more considered by investors and traders due to its higher degree of accuracy concerning trading signals. It is calculated as below:

**%D line = Simple Moving Average of three periods of %K.**

**Overbought**. This level gives a prediction of an impending recession of the line. Hence, traders and investors regard it as a signal to sell. Alternatively, when the reading goes below 20, the Stochastic Oscillator indicates a buy signal as that region is classified as an

**Oversold**one. The Oversold and Overbought ranges are open to configurations, but 20 and 80 are the respective default values.

### Briefly describe at least 2 ways to use the Stochastic Oscillator in a trade.

### Define in your own words what is Parabolic Sar?

### Explain in detail what the price must do for the Parabolic Sar to change from bullish to bearish direction and vice versa

### Briefly describe at least 2 ways to use Parabolic Sar in a trade?

### It shows a step by step on how to add the Stochastic Oscillator to the chart (Indicating the% k Line and the% D Line, the overbought and oversold zone.

- First click on the chart feature on the navigation bar of the Tradingview landing page. The high stock is Apple. Hence it will open the chart for the Apple stock.

- A chart display shows the performance of Apple Inc. in a default selected range of time. Click on the Indicators and Strategies button on the top toolbar.

- The dialog box for Indicators and Strategies show offering diverse built-in indicators.

- Scroll and select Stochastic Indicator.

- The Stochastic Oscillator is added below the chart body.

- The respective components of the Stochastic Oscillator are labeled as below.

### Show step by step how to add Parabolic Sar to the chart and how it looks in an uptrend and in a downtrend.

- First click on the chart feature on the navigation bar of the Tradingview landing page. The high stock is Apple. Hence it will open the chart for the Apple stock.

- A chart display shows the performance of Apple Inc. in a default selected range of time. Click on the Indicators and Strategies button on the top toolbar.

- The dialog box for Indicators and Strategies show offering diverse built-in indicators.

- Scroll and select Parabolic SAR

- The Parabolic SAR indicator is added to the graph. The respective components of PSAR are labeled as denoted in the screenshot.

### Add the two indicators (Stochastic Oscillator + Parabolic Sar) and simulate a trade in the same trading view, on how a trade would be taken.

As discussed earlier, a combination of indicators is paramount for traders to get a fairly accurate look at the performance of an asset on the market. Repeat the steps for adding a stochastic oscillator and PSAR will combine the two indicators on one chart as depicted above.

The PSAR indicator shows an entry point that foreshadows a bearish trend. The corresponding indication of the Stochastic Oscillator demonstrates that the Apple stock has hit an overbought limit and hints at an impending downwards trend. A confirmed bearish trend is later seen on the chart as the prices of Apple Inc. stock continue to dip until there was a reversal.

At the reversal point, the Parabolic SAR forms a series of dots below the candlesticks. This hints at a bullish trend of the price of the Stock. The corresponding indication by the Stochastic Oscillator demonstrates that the stock was in the Oversold limit and foreshadows a potential upwards movement of the price of the Apple Inc. stock. A bullish trend is indeed witnessed afterward on the chart. It continues till there was a short reversal and then resumes its bullish movement.

### Conclusion

### Future reading

- CRYPTO ACADEMY SEASON 3 WEEK 7 / STOCHASTIC OSCILLATOR AND PARABOLIC SAR / HOMEWORK POST FOR PROFESSOR @ lenonmc21
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