How to Trade Using the Stochastic

As we said earlier, the Stochastic tells us when the market is overbought or oversold. The Stochastic is scaled from 0 to 100.
When the Stochastic lines are above 80 (the red dotted line in the chart above), then it means the market is overbought. When the Stochastic lines are below 20 (the blue dotted line), then it means that the market is oversold.
As a rule of thumb, we buy when the market is oversold, and we sell when the market is overbought.