Momentum

Stochastic

Edited by GANGCO STUDIO · Updated

Contents Stochastic
  1. MACD
  2. Ichimoku Cloud
  3. Pivot Line
  4. DMI
  5. Parabolic SAR
  6. Aroon
  7. Supertrend
  8. Exponential Moving Average
  9. MA Golden Cross
  10. MA Dead Cross
  11. ADX
  12. RSI
  13. Stochastic
  14. SONAR
  15. TRIX
  16. CCI
  17. ROC
  18. Disparity Index
  19. Psychological Line
  20. Williams %R
  21. AB Ratio
  22. Ultimate Oscillator
  23. Volume Profile
  24. OBV
  25. MFI
  26. Volume Oscillator
  27. Volume Ratio
  28. AD Line
  29. EOM
  30. PVT
  31. CMF
  32. VWAP
  33. Force Index
  34. Bollinger Bands
  35. ATR
  36. Envelope
  37. Keltner Channels
  38. Donchian Channel
  39. Standard Deviation
  40. Chaikin Volatility
  41. Three White Soldiers
  42. Three Black Crows
  43. Morning Star
  44. Evening Star
  45. Hammer
  46. Inverted Hammer
  47. Hanging Man
  48. Shooting Star
  49. Doji
  50. Bullish Marubozu
  51. Bearish Marubozu
  52. Bullish Engulfing
  53. Bearish Engulfing
  54. Piercing Line
  55. Dark Cloud Cover
  56. Bullish Harami
  57. Bearish Harami
  58. Elder-Ray Index
  59. Coppock Curve

An indicator that shows, on a scale of 0 to 100, where today’s close sits between the lowest and the highest price of the last few candles.

Weapon tier
Advanced
Slots used
Sub-charts 1/2
Created by
George Lane · 1950s

Concept

The %K line answers “if the lowest low of the last 14 candles is 0 and the highest high is 100, where is today’s close?” When the close is near the top of that range, it is close to 100; near the bottom, close to 0. The %D line is a slower line: the average of %K over 3 candles.

The panel has dotted reference lines at 20 and 80. Above 80 is commonly called “overbought” and below 20 “oversold”. Despite the names, being there does not by itself mean the direction is about to change.

  • percentK
  • percentD

Charts by TradingView Lightweight Charts™

80 candles with the Stochastic %K and %D lines and volume. While the price falls, %K stays pinned to the bottom below the 20 line, and at candle 60 (↑ marker) %K crosses above %D from below. After that the price rises and both lines climb toward 80. Keyboard: ←/→ to move, +/− to zoom, 0 to see the whole chart.

At the candle with the ↑ marker, %K climbs from the bottom above %D. Earlier in the chart there was another rise from below 20, and that time the price went up a little and came back down. The same signal does not always lead to the same result. Drag the chart sideways with a finger or the mouse to move it, and pinch with two fingers to zoom in. With a keyboard, click the chart, then use ←/→ to move and +/− to zoom.

How it is calculated

Find the lowest low and the highest high of the last 14 candles.

%K = (close − lowest low) ÷ (highest high − lowest low) × 100. If the close equals the highest high it is 100; if it equals the lowest low it is 0.

%D = the average of %K over the last 3 candles. It moves more slowly than %K.

The %K in this game is the “fast” stochastic, without extra smoothing. That is why the line is jagged.

Parameters

What it setsName in the gameDefaultRange
Candles used for the lowest low and highest high (%K) kPeriod 14 2 – 100
Candles used to average %K (%D) dPeriod 3 2 – 30

Trading ideas

Cross at the bottom: when %K crosses above %D below 20, it is commonly read as “strength is returning after a fall”. The chart on this page shows that scene. At the top, the mirror image is %K crossing below %D above 80.

With the trend: some traders use only the signals that agree with the trend (lesson 2) — for example, buying when the stochastic dips toward 20 during a pullback in an uptrend and then turns back up.

Common traps

  • In a strong trend the stochastic can stay above 80 or below 20 for a long time. Trading only on “above 80, so sell” or “below 20, so buy” means fighting most of the trend.
  • The fast %K is jagged and crosses %D often. Treating every cross as a signal gives many false signals.
  • None of these are sure signals. Read them together with the trend and volume.

In the game

  • “Stochastic” is a “Advanced” weapon and uses 1 of the “Sub-charts” panels (limit 2). Volume in the starting setup already uses 1, so adding it brings it to 2 (0 left).
  • The panel shows two lines, %K (percentK) and %D (percentD), with dotted reference lines at 20 and 80.

Related indicators and lessons

  • RSI — An indicator that compares recent up moves with recent down moves and shows, as a number from 0 to 100, which side has been stronger lately.
  • SONAR — An indicator that draws how much an exponential moving average has risen (or fallen) compared with a few candles ago, to read the “slope” of the trend.
  • TRIX — An indicator that shows by what percent, per candle, a very smooth line — an exponential moving average stacked three times — rises or falls.
  • CCI — An indicator that shows how many times its usual swing the price has moved away from its recent average.
  • ROC — An indicator that connects into a line how many percent the close has risen or fallen compared with the close a few candles ago.
  • Disparity Index — An indicator that shows, around a baseline of 100, how many percent the close is away from its moving average.
  • Psychological Line — An indicator that reads the market mood, upbeat or gloomy, from the percentage of recent candles that closed higher.
  • Williams %R — An indicator that shows, as a number from −100 to 0, how far today’s close sits below the highest price of recent candles.
  • AB Ratio — An indicator that compares how far each candle rose above and fell below its open, showing which side was stronger during the session.
  • Ultimate Oscillator — An indicator that blends buying pressure over a short, a medium and a long period into a number from 0 to 100.
  • 2. Trends and sideways moves