Quick Definition

The Stochastic Oscillator is a momentum indicator used in technical analysis that compares a particular closing price of a security to a range of its prices over a certain period of time.

Formula

Examples

• 1A trader observes that the Stochastic Oscillator for a stock is below 20, indicating that the stock might be oversold and could potentially rebound.
• 2During a market uptrend, an investor uses the Stochastic Oscillator to identify moments when the stock is temporarily overbought, suggesting a short-term pullback.
• 3A financial analyst uses the Stochastic Oscillator to confirm a trend reversal when the indicator moves from below 20 to above 80.

Tags