The Stochastic cycle indicator shows the turning points in the stochastic indicator. This is useful for identifying divergence between the indicator and price. The indicator plots the standard stochastic oscillator and marks the upward turning points with green dots and downward turning points with red dots. This gives added visual advantage while viewing the stochastic indicator.
The indicator can be customized to show how many bars to display the indicator in chart. Stochastic oscillator is used to identify overbought/oversold market conditions. It is also used to trade divergence between oscillator and price. The stochastic cycle indicator provides better visual representation with the dots marking the turning points.
Usually values above 70 is considered as overbought. When a red dot appears above 70, the interpretation is that the upward move is losing momentum. When it is below 30 and green dot appears, the down move is losing momentum. A divergence trade example is marked in the chart.
StochasticCycle.zip (2.09 KB)