Stochastic Oscillator
Original schematic showing the guide's principal visual relationships.
Formula and components
A bounded oscillator comparing the latest close with the recent high-low range.
%K = 100 × (Close − Lowest Low)/(Highest High − Lowest Low); %D is a moving average of %K.
How it works
The indicator transforms price, range, or volume observations over a selected lookback. Shorter settings react faster but create more noise; longer settings respond more slowly and emphasize the underlying regime. Always compare the reading with price structure and timeframe.
How to read it
Read %K/%D crossovers, 80/20 zones, and divergence in the context of the prevailing range or trend.
Confirmation checklist
Compare the current reading with its centerline, thresholds, prior swing, and price action. Crossovers and divergences are context clues, not standalone entries.
Limitations and false signals
The oscillator can stay extreme during persistent trends and creates many premature reversal signals without price confirmation.