Stochastic Oscillator

The Stochastic Oscillator compares where price closed relative to its recent high-low range. It produces two lines (%K and %D) that oscillate between 0 and 100, helping you spot overbought and oversold conditions with more nuance than RSI.

Why It Matters

The Stochastic is particularly good at catching turning points in ranging markets. Because it measures where price is within its recent range, it can identify when a move is exhausting before the actual reversal happens.

Settings Explained

Direction — Bullish, bearish, or both.

%K Period — The lookback period for the main oscillator line. Standard is 14.

%D Period — The smoothing period for the signal line. Standard is 3.

%K Smoothing — Additional smoothing applied to %K. Higher values slow the oscillator, reducing false signals.

Overbought Level — Above this level, the market is considered overbought. Standard is 80.

Oversold Level — Below this level, the market is considered oversold. Standard is 20.

Look Back Mode — How far back the oscillator is calculated.

Outputs

• Stochastic %K — The main oscillator line, showing where price closed within the recent range
• Stochastic %D — The smoothed signal line, used for crossover signals

Example Use Case

You build a strategy that buys when %K crosses above %D in the oversold zone (below 20) and sells when %K crosses below %D in the overbought zone (above 80). This double-confirmation approach reduces false signals.