momentum Indicator
What Is Stochastic Oscillator (STOCH)?
The Stochastic Oscillator compares a closing price to its price range over a period, measuring momentum.
Quick Answer
The Stochastic Oscillator compares a closing price to its price range over a period, measuring momentum.
What Does STOCH Measure?
The Stochastic Oscillator was developed by George Lane in the 1950s. It compares where the price closed relative to its high-low range over a set period. The indicator consists of two lines: %K (fast line) and %D (slow line). Values above 80 indicate overbought conditions, while values below 20 indicate oversold conditions.
Formula:
%K = ((Close - Lowest Low) / (Highest High - Lowest Low)) × 100; %D = 3-period SMA of %KHow to Read STOCH
- 1Above 80 suggests overbought conditions
- 2Below 20 suggests oversold conditions
- 3%K crossing %D signals potential trade entries
- 4Divergence indicates potential reversals
How to Use STOCH in Trading
✓Identify overbought and oversold levels
✓Generate crossover trading signals
✓Spot momentum divergences
✓Confirm trend reversals
STOCH Settings
| Setting | Default | Description |
|---|---|---|
| %K Period | 14 | Lookback period for %K |
| %D Period | 3 | Smoothing period for %D |
| Smooth K | 3 | Smoothing for %K line |
Common Mistakes to Avoid
✕Taking signals against the trend
✕Not waiting for crossover confirmation
✕Using in strongly trending markets
✕Ignoring divergence signals
Use STOCH in VaultCharts
VaultCharts includes Stochastic Oscillator with customizable settings. Combine it with our automated pattern detection and trade signals for better analysis.