Stochastic Oscillator Explained
The stochastic oscillator measures where the close sits within the recent high-low range, flagging overbought and oversold momentum on a 0–100 scale.
How it works
The stochastic compares the closing price to the high-low range over a lookback (classically 14). The idea: in an uptrend closes cluster near the highs; in a downtrend near the lows. The %K line is the raw reading and %D is a smoothed average of it.
Readings above 80 are overbought and below 20 oversold. Like the RSI, these levels flag stretched momentum, not automatic reversals — in strong trends the stochastic can pin in the extreme zone.
Crossovers and divergence
A %K crossing above %D in the oversold zone is a common bullish trigger; the reverse in the overbought zone is bearish. The crossover matters more than the raw level.
As with other oscillators, divergence against price is the higher-value read, and it works best confirmed by a level and structure rather than traded in isolation.
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Play Chart Bound free → Try today's Call the Candle →Frequently asked questions
What does the stochastic oscillator measure?
It measures where the current close sits within the recent high-low range, on a 0 to 100 scale, to gauge momentum and flag overbought (>80) or oversold (<20) conditions.
What is the difference between %K and %D?
%K is the raw stochastic line; %D is a moving average of %K that smooths it. A crossover of the two is the common trade signal.
Is stochastic better than RSI?
Neither is strictly better. Stochastic is more sensitive and gives more signals; RSI is smoother. Both flag stretched momentum and work best confirmed by structure, not alone.