Stochastic Oscillator
Momentum oscillator comparing a closing price to its high-low range over 14 periods; values above 80 are overbought, below 20 oversold.
%K = 100 × (Close − Lowest Low_n) / (Highest High_n − Lowest Low_n); %D = SMA(3) of %K
The Stochastic Oscillator places the latest close within the recent high-low range, producing %K (the fast line, 0–100). A 3-period SMA of %K creates %D, the signal line. Overbought is conventionally above 80; oversold below 20.
Traders look for %K/%D crossovers within the extreme zones, and for divergence between price swings and stochastic swings. A "slow stochastic" smooths %K to reduce noise, making it more practical for swing traders.
On the desk
%K falls to 17 while %D sits at 22. When %K crosses up through %D inside the oversold zone, a long signal fires. Traders wait for the first candle close above the crossover candle to reduce false positives.