In the late s, George Lane developed stochastics, an indicator that measures the relationship between an issue’s closing price and its. However, retirement means different things to different people, as Lane was up until 2 a.m. trading Italian bonds the night before he spoke with this reporter. Developed by George C. Lane in the late s, the Stochastic Oscillator is a momentum indicator that shows the location of the close relative to the high-low.

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Remember that this is a set-up, not a signal. If you can also spot a breakout out of sideways range, even better.

Stochastic oscillator

This is interpreted as a signal to increase the current position, or liquidate if stkchastics direction is against the current position. No matter how fast a security advances or declines, the Stochastic Oscillator will always fluctuate within this range.

Great stuff explained with ease. Finally, I want to provide the most common signals and ways how traders are using the Stochastic indicator:. The next decline is then expected to result in a tradable bottom. As long as the Stochastic keeps crossed in one direction, it shows that the trend is still valid. The default setting for the Stochastic Oscillator is 14 periods, which can be days, weeks, months or an intraday timeframe.

As we will see shortly, the indicator analyses price movements and tells us how fast and how strong the price moves.


In order to use StockCharts. The Stochastic Oscillator measures the level of the close relative to the high-low range over a given period of time. The oscillator ranges from zero to one hundred. In this regard, the Stochastic Oscillator can be used to identify opportunities in harmony with the bigger trend.

Sorry if this is such a noob question, I am just starting trading. A move above 20 is needed to show an actual upturn and successful support test green dotted lines.

Post a Reply Cancel reply. Combining the Stochastic with other tools As with any other trading concept or tool, you should not use the Stochastic indicator by itself.

Lane’s Stochastic Oscillator

A bull set-up is basically the inverse of a bullish divergence. For more details on the syntax to use for Stochastic Oscillator scans, stochastic see our Scanning Indicator Reference in the Support Center. Should a security trade near support with an oversold Stochastic Oscillator, look for a break above 20 to signal an upturn and successful support test.

Thanks good bless to your life. Always trade in the lwne of your moving averages and as long as price is above the moving average, only look for longs — and vice versa. Very nicely described and correlated with other tools.

Stochastic Oscillator [ChartSchool]

The next advance is expected to result in an important peak. The indicator can be placed above, below or behind the actual price plot. A bearish divergence forms when price records a higher high, but the Stochastic Oscillator forms a lower high. Securities can become overbought and remain overbought during a strong uptrend. Click here to learn how to enable JavaScript.


Divergence-convergence is an indication that the momentum in the market is waning and a reversal may be in the making.

Stochastic Oscillator

Thank You Sir, its very informative info. I have 5,3,3 as I day trade.

When you see that the Stochastic is suddenly accelerating into one direction and the two Stochastic bands are widening, then it can signal the start of a new trend. Click here to download this spreadsheet example.

This shows less downside momentum that could foreshadow a bullish reversal. Trading in the direction of stochaatics bigger trend improves the odds. Yahoo was trading between 14 and 18 from July until April The Stochastic Oscillator equals 15 when the close was near the bottom of the range. Notice how the oscillator can move above 80 and remain above 80 orange highlights. You need to find an established trend with a valid trendline and then wait for price to break it with the confirmation of your Stochastic.

The subsequent bounce did not last long stofhastics the stock quickly peaked. I am always a fan of going into how an indicator analyzes price and without getting too deep into the mathematics, this is how the indicator analyzes price:.

Overbought vs Oversold The stochastis of overbought and oversold is one of biggest problems and faults in trading.

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