The Stochastic is an oscillator that compares the current position in relation to a range of courses in a given period.

The Stochastic oscillator is represented by two lines operating between 0% and 100%. The area between 0% and 20% (80% and 100%) is considered an oversold zone (overbought).

The main line is called %K and the secondary line %D. The %D line is a moving average of the %K line. There are two main types of stochastique: fast Stochastics and slow Stochastics.

The commonly used period is 14 days.

Purchase signal

When the trend of the Stochastic is changing and the trend is now on the rise in oversold zone (before crossing the line up of 20%).
The %K line is increasing and crosses the %D line.

Sale signal

When the trend of the Stochastic is changing and the trend is now on the decline in overbought zone (before crossing the line down of 80%).
The %K line is decreasing and crosses the %D line.

Note

When the trend of the Stochastic is in opposition with the trend of the price, the current trend of the price will decrease. This is called divergence and should be considered as a warning before a change in trend.