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Stochastic oscillator

Where today's close sits inside the high-low range of the last N bars, 0–100.

The stochastic oscillator, developed by George Lane in the 1950s, measures momentum by asking where the current close sits within the high-to-low range of the look-back window. %K is the raw measure; %D is a simple moving average of %K used as the signal line. The canonical setting is 14, 3, 3 — 14-bar look-back, 3-bar SMA of %K to smooth it, then 3-bar SMA of %K to get %D.

Reads are similar to RSI: above 80 = overbought, below 20 = oversold. The classic signal is a %K / %D crossover near the extremes, plus divergence with price.

Unlike RSI, stochastic measures position-in-range rather than ratio-of-gains-to-losses, so the two oscillators behave differently in choppy markets — stochastic is faster and noisier.

Formel

%K = 100 · (C − L_N) / (H_N − L_N)
%D = SMA(%K, 3)

Beispiel

14-bar high = 110, low = 100, current close = 107. %K = 100 · (107 − 100) / (110 − 100) = 70. Trending high, not yet overbought.

Wie Noon Barbari Stochastic oscillator nutzt

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See the indicators reference

Verwandte Begriffe

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