The stochastic oscillator is a popular momentum indicator that helps to identify overbought and oversold conditions and potential trend reversals. It was developed by George Lane in the 1950s and is based on the observation that as prices increase, the closing price tends to be closer to the highest price over a specified period. It calculates a value between 0 and 100. Values above 80 are generally considered overbought, and values below 20 are considered oversold.
Stochastic Oscillator - Technical Analysis from A to Z
The Stochastic Oscillator compares where a security's price closed relative to its price range over a given time period. The Stochastic Oscillator is displayed as two lines. The main line is called "%K." The second line, called "%D," is a moving average of %K. The %K line is usually displayed as a solid line, and the %D line is usually displayed as a dotted line. There are several ways to interpret a Stochastic Oscillator. Three popular methods include..
Stochastic Oscillator - Technical Analysis from A to Z