Stochastic Oscillator

L’idée en termes simples

In an uptrend, prices tend to close near the top of their recent range; in a downtrend, near the bottom. When closes start slipping away from the extremes, momentum is changing.

Mode de calcul

%K compares the close with the lowest low and highest high of the last 5 candles, smoothed over 3 candles. %D is an average of %K.

raw = (close − lowest low) ÷ (highest high − lowest low) over 5 candles
%K = 100 × sum of (close − lowest low) over 3 ÷ sum of (highest high − lowest low) over 3
%D = SMA(%K, 3)

Comment l’utiliser

• Above 80: near the top of the range; below 20: near the bottom.
• %K crossing %D from below 20: a possible buy; from above 80: a possible sell.
• Best in sideways markets; in trends, use it to time entries in the trend direction.

Tirer des conclusions

• In strong trends the Stochastic can stay above 80 or below 20 for a long time.

Points de vigilance

• Many signals: use it with support and resistance, not on its own.

Un peu d’histoire

George Lane developed the Stochastic Oscillator in the 1950s.