Stochastic

The Stochastic locates the current close within the high-low range of a lookback window, plotting the %K line alongside a %D signal line on a 0 to 100 scale. George Lane's insight: late in an advance, closes start finishing lower inside each bar's range even while new highs print, and the oscillator surfaces that slippage. This is the standard raw implementation of Lane's stochastic with the classic parameter set — a 14-bar %K smoothed over 3 bars, a 3-bar %D, and dashed reference levels at 80 and 20 with a shaded band between them.

How to Trade the Stochastic?

• %K above 80: closes settling near the top of the recent range — overbought, most meaningful as a fade in range-bound conditions.
• %K below 20: closes pressing the bottom of the range — oversold, with the mirror caution.
• Bullish %K/%D cross: the classic timing trigger, strongest from inside the oversold zone.
• Bearish %K/%D cross: the mirror trigger, strongest from overbought.
• Divergence: a new price extreme on a lesser %K reading warns that range position is deteriorating.

In strong trends the oscillator parks at an extreme, so an 80-plus reading alone is no argument to sell — the tool works best behind a directional read.

Stochastic Settings

• %K Length (default 14): bars for the highest-high/lowest-low range of raw %K; shorter reacts faster but whipsaws.
• %K Smoothing (default 3): the SMA applied to raw %K — 1 gives the fast stochastic, 3 the classic slow version.
• %D Smoothing (default 3): the moving-average length of the signal line; shorter fires crosses earlier and more often.
• Overbought Level (default 80) and Oversold Level (default 20): the reference thresholds; widening toward 90/10 filters strong-trend noise.

Alerts

Six alert conditions: bullish and bearish %K/%D crosses, plus %K entering and exiting the overbought and oversold zones.

Frequently Asked Questions

Is this the fast or the slow stochastic?

Either, via one input. %K Smoothing at its default of 3 plots the classic slow stochastic; setting it to 1 removes the smoothing pass and yields the fast version. %D remains a moving average of whichever %K is plotted.

How does the Stochastic differ from the RSI?

RSI is built from the relative size of up and down moves; the stochastic reads where the close sits inside the recent high-low range. The stochastic is the twitchier of the two, tagging its boundaries far more often — useful for timing, noisier on its own.

How should the Stochastic be combined with other tools?

A common structure takes oversold signals only while a trend filter points up, overbought only while it points down, crosses timing entries inside that bias. The oscillator times the trade; something else justifies it.