Stochastic Oscillator
Momentum oscillator comparing a closing price to its high-low range over 14 periods; values above 80 are overbought, below 20 oversold.
Formula
%K = 100 × (Close − Lowest Low_n) / (Highest High_n − Lowest Low_n); %D = SMA(3) of %K
The Stochastic Oscillator places the latest close within the recent high-low range, producing %K (the fast line, 0–100). A 3-period SMA of %K creates %D, the signal line. Overbought is conventionally above 80; oversold below 20.
Traders look for %K/%D crossovers within the extreme zones, and for divergence between price swings and stochastic swings. A "slow stochastic" smooths %K to reduce noise, making it more practical for swing traders.
Example
%K falls to 17 while %D sits at 22. When %K crosses up through %D inside the oversold zone, a long signal fires. Traders wait for the first candle close above the crossover candle to reduce false positives.
Related Terms
Commodity Channel Index (CCI)
Oscillator measuring how far price deviates from its statistical mean; above +100 is strong momentum, below −100 suggests oversold.
IntermediateRelative Strength Index (RSI)
Momentum oscillator (0–100) that flags overbought conditions above 70 and oversold below 30 over a default 14-period lookback.
BeginnerStochastic RSI
RSI of RSI — applies the Stochastic formula to RSI values for a hyper-sensitive oscillator that generates more signals than either parent indicator.
IntermediateUltimate Oscillator
Momentum oscillator that averages buying pressure across 7-, 14-, and 28-period timeframes to reduce false signals from a single period.
IntermediateWilliams %R
Inverted Stochastic oscillator (0 to −100) identifying overbought (above −20) and oversold (below −80) conditions over a 14-period window.
Beginner