Among novice traders, it is customary to disdain the technical indicator called stochastic. Here are the mythical support and resistance levels, discovered at the beginning of this century by A. Gerchik it is cool, and stochastic for suckers, his signals do not work and, at all, it goes off scale indefinitely with a trend.
But this is from ignorance of the subject and inability to use it.. Think, many will be surprised when they find out that the stochastic and Donchian Channels, and, respectively, and levels, discovered by A. Gerchik, it is practically, одно и то же, only in a different feed. And, stochastic, in this case, turns out to be much more informative as Donchian channels, and A. Gerchik's levels.
To understand it, it is necessary to explain what the stochastic generally shows. And he shows that, where the last price is relative to the N-period price range. For example, on the picture, where the 20-period stochastic is displayed at the top, and below the 20-period Donchian channel, stochastic clearly indicates that the last price is in 17% from the lower support line. When the price hits the support line, stochastic will be at zero. Donchian channels and Gerchik levels do not provide such accurate information.
If the stochastic is at the mark 50 — this means that the last price is exactly in the middle of its range. Well and so on, respectively. So that, despite its visual difference, price channels and stochastics, practically, interchangeable, strange as it sounds — you just need to understand their essence :)
