Before diving deeper into the practical side of using the stochastic oscillator on a 1-minute chart, it is crucial to understand how the indicator works and how it can be implemented on a 1-minute chart. 

As already mentioned, the stochastic oscillator is a momentum indicator that measures the relationship between an asset’s price and its price range over a given period of time. 

The oscillator consists of two lines - %K and %D. The %K line is the more sensitive of the two and %D is a moving average of %K. The two lines are typically plotted as a solid and dotted line, or in different colors. 

When the %K line crosses above the %D line, it is considered a bullish signal, indicating that the momentum behind the asset's price movement is increasing. On the other hand, when the %K line crosses below the %D line, it is considered to be a bearish signal - indicating that the momentum behind the asset’s price movement is decreasing. 

On a 1-minute chart, traders need to be more careful and it is best to choose a slower %K period to avoid false signals. 

To apply the indicator to the chart of a given pair of currencies, users must first pick the stochastic oscillator from the indicator menu and select the %K, %D, and slow %K values for the stochastic to be applied properly. 

While many traders use the 5, 3, and 3 values for stochastic oscillators, the 1-minute chart is highly sensitive and moves very quickly, which is why a lower %K value can prove to be wildly misleading and generate numerous false signals. To combat this, it is best to use a value of 14 as %K, while %D and slow %K remain at 3. A slower moving average reduces the risk of false signals. 

Let’s see how the indicator looks when plotted on a chart:

In this example, we can see the exponential moving averages crossing and diverging, which are used to generate buy and sell signals. The indicator shows where the market is overbought and oversold. 

Buy & Sell Signals 

Using the stochastic for buy and sell signals is fairly simple; if the chart shows that an asset is overbought and the 1-minute oscillator is starting to turn down, this may be a good time to exit any long positions, as a downward movement in price is likely to occur. 

As a rule of thumb, the general buy and sell signals on a stochastic 1-minute chart can be interpreted as follows:

• Buy when the %K line crosses above the %D line
• Sell when the %K line crosses below the %D line

These instances show that the momentum behind a buying/selling trend is slowing down and a reversal is likely. Traders can use this information to open short/long positions to make the most out of the opportunity. 

While the stochastic oscillator may be a useful and widely-used technical indicator, it does come with its own set of pros and cons, which are heightened when used on a 1-minute chart, as it moves very quickly - causing the indicator to generate numerous buy and sell signals. 

Pros

• Easy to interpret - the stochastic oscillator is a relatively simple technical indicator that is easy to interpret, regardless of experience level 
• Fast signals - on a 1-minute chart, the stochastic oscillator can generate quick signals, which is convenient for traders 
• Widely used - the stochastic oscillator is a commonly used technical indicator, which means beginners can find plenty of information about how to properly apply it 

Cons

• False signals - if the %K line does not use a slow EMA, the indicator can generate many false signals 
• Over-reliance on the indicator - some traders may overly rely on the stochastic oscillator for their trade decisions - ignoring other market factors that can cause price movements 
• Lagging - the stochastic is a lagging momentum indicator, which can cause traders to miss out on many opportunities on a 1-minute chart 

• Stochastic is a momentum indicator that measures the relationship between the price of an asset and its price range over a given period of time
• Stochastics consist of two plotted lines - %K and %D
• For a 1-minute chart, a slower %K line is preferable to avoid false buy and sell signals 
• Setting the %K at 14, while %D and slow %K are set at 3 can generate the most accurate signals for FX traders