Stochastic Oscillator = 100 * (closing price for a given day - lowest price for the previous 14 trading days) / (highest price for the previous 14 trading days - lowest price for the previous 14 trading days).
What Does Stochastic Oscillator Mean?
A technical momentum indicator that compares a security's closing price to its price range over a particular period. The oscillator's sensitivity to market movements can be reduced by adjusting the time period or taking a moving average of the result. This indicator is calculated by using the following formula:
%K = 100[(C - L14)/(H14 - L14)]
Where C = the most recent closing price, L14 = the low of the 14 previous trading sessions, H14 = the highest price traded during the same 14-day period, %D = 3-period moving average of %K.
Investopedia explains Stochastic Oscillator
The theory behind this indicator is that in an upward-trending market, prices tend to close near their highs; conversely, in a downward-trending market, prices tend to close near their lows. Transaction signals occur when the %K crosses a three-period moving average called the %D.
Related Terms:
• Downtrend
• Moving Average—MA
• Moving Average Convergence Divergence—MACD
• Technical Analysis
• Uptrend
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