bullish and bearish divergences in a normal financial market 

environment. When the price-action is distorted due vertical 

price movements or high volatility and market manipulations, 

one should disregard those slow stochastic divergences. Note 

that there are three types of stochastic indicator:

full stochastic indicator, fast stochastic and the slow stochastic 

indicator. The power of the stochastic trading

is about trading the slow stochastic indicator (double smoothed 

stochastic). 

 I only use the slow stochastic, and my favourite 

stochastic setting is (8,3,3). You may call me Mr stochastic. Though, 

I am not related to George Lane, we do share the same first name, 

but also the passion for the slow stochastic trading. The ultimate 

role of the slow stochastic oscillator is to reveal true bullish or 

bearish divergences in the 

financial markets. One should not use either the fast or full 

therefore frequent slow stochastic divergences alert market 

but the most popular patterns are double bottom and top chart 

patterns. Apart from those patterns there are also thirteen specific 

stochastic patterns. Indeed, the slow stochastic patterns allow day 

or high frequency traders often misuse the slow stochastic indicator. 

However, oversold means support, and overbought points to a 

resistance. Note that a resistance does not always mean a guaranteed 

during trending phases. Usually, one will buy or sell at the start of a 

mini directional cycle after a short contra-trend. Those contra-trend 

short pauses usually end with a low trading volume (no demand). 

Consequently, due to a new surge in the trading activities at the start 

of the subsequent directional price-action, the trading volume increases 

strategies with the three market patterns without neglecting the 

breakout or breakdown high probability trade set-ups. Generally, when 

the slow stochastic reaches the overbought level for the first time it 

signifies that the price is at a resistance. However, when that resistance 

turns into a support, the slow stochastic stays overbought for a long 

time as the price continues to break new resistance levels. Evidently, 

the slow stochastic indicator is overbought during a bullish breakout, 

scan for stocks that exhibit overbought slow stochastic trading signals 

stochastic level as a screening criteria to isolate best breakdown trade 

set-ups.

Remember that there are three types of stochastic, but the most powerful 

one is the slow stochastic indicator. Its ultimate role is to expose bullish 

and bearish divergences. Note that the slow stochastic divergences are 

warnings, one should never

rush to buy or sell a financial instrument just because of those warnings. 

 One will only acknowledge them, but will keep eyes wide open on the 

price-action (number one technical indicator) until there is a clear cut 

confirmation. To avoid divergence trading mistakes, one must learn 

how to filter out false divergences and implement a valid top-down 

trading method to control the risk of trading the slow stochastic divergences.