Stochastic Oscillator
A technical momentum indicator that compares a security's closing price to its price range over a given time period. The oscillator's sensitivity to market movements can be reduced by adjusting the time period or by taking a moving average of the result. This indicator is calculated with the following formula:
Investopedia Commentary
The theory behind this indicator is that in an upward-trending market prices tend to close near their high, and during a downward-trending market, prices tend to close near their low. Transaction signals occur when the %K crosses through a three-period moving average called the "%D".
Related Links
Getting to Know Oscillators - Part 3: Stochastics
See also: Close, Indicator, Technical analysis, Williams R%
Also spelled: stoch, stockastic, Stochastics