Stochastic Oscillator
0-100 oscillator comparing close to high/low range over N periods. Sensitive to reversals.
Neutral
Difficulty: ●●○○○
Reliability: 6/10
Invented by George Lane (1950s). Measures where the close sits in the recent range.
Two versions
- Stochastic Fast (5,3): very reactive, many signals but noisy
- Stochastic Slow (14,3,3): smoothed, more commonly used
Reading
- > 80: overbought → potential correction
- < 20: oversold → potential bounce
- %K / %D crossover: entry signal
- Price/stoch divergence: often-reliable reversal signal
vs RSI
Stoch stays in OB/OS zones much less long than RSI in strong trends. Better in ranges, less reliable in strong trends.
Classic combo
Stoch + historical S/R structure. When Stoch crosses oversold RIGHT on a support, it's a solid entry.
When to look
Ranging markets mainly. In trends, use only divergences.
Confirmation
Cross + extreme level + S/R confluence = high-probability setup.
Also called: Stoch, %K %D, Lane Stochastic