The premise of stochastics is that when a stock trends upwards, its tends to trade at the high end of the day's range. Price action refers to the range of prices at which a stock trades throughout the daily session. For example, if a stock opened at $10, traded as low as $9.75 and as high as $10.75, then closed at $10.50 for the day, the price action or range would be between $9.75 (the low of the day) and $10.75 (the high of the day). Conversely, if the price has a downward movement, the closing price tends to trade at or near the low range of the day's.
Recap: How to use the Stochastic indicator. You might not need the Stochastic indicator when you are able to read the momentum of your charts by looking at the candles, but if the Stochastic is the tool of your choice, it certainly does not hurt to have it on your charts (this goes without a judgment whether the Stochastic is useful or not). This is a trend-following system based on the use of several indicators; two EMAs, and the MACD. I will also be using the Fibonacci Retracement tool Two line MACD with EMA's and Fibonacci retracement Learn Forex Trading.
Schwager, the co-founder of Fund Seeder and author of several books on technical analysis, uses the term 'normalized' to describe stochastic oscillators that have predetermined boundaries, both on the high and low sides. An example of such an is the (RSI)—a popular momentum indicator used in technical analysis—which has a range of 0 to 100. It is usually set at either the 20 to 80 range or the 30 to 70 range. Whether you're looking at a sector or an individual issue, it can be very beneficial to use in conjunction with each other.