Stochastic Oscillator:

Stochastic Oscillator:

This is used to indicate overbought/oversold conditions on a scale 0-100%. The indicator is based on the observation that in a b up trend, closing prices for periods tend to concentrate in the higher part of the period’s range. Conversely, as prices fall in a b down trend, closing prices tend to be near to the extreme low of the period range.

Stochastic calculations produce two lines, %K and %D which are used to indicate overbought/oversold areas of a chart. Divergence between the stochastic lines and the price action of the underlying instrument gives a powerful trading signal.