Definition
The Stochastic Oscillator measures where the current close is relative to the high-low range over a period. It oscillates between 0-100. Above 80 is overbought; below 20 is oversold. The %K line and its %D signal line are used for crossover signals.
Formula
%K = (Close - Lowest Low) / (Highest High - Lowest Low) × 100
%D = 3-period SMA of %K
Example
If the 14-day high is $55, low is $45, and current close is $52, %K = (52-45)/(55-45) × 100 = 70%. Close is in the upper 70% of the range.
FAQ
What is Stochastic Oscillator?
A momentum indicator comparing closing price to its range over a period.
How do you calculate Stochastic Oscillator?
A common formula for Stochastic Oscillator is: %K = (Close - Lowest Low) / (Highest High - Lowest Low) × 100 %D = 3-period SMA of %K
Why is Stochastic Oscillator important?
Stochastic Oscillator helps investors evaluate technical analysis and make more informed decisions.