Introduction Stochastic Oscillator is a highly useful indicator. This indicator shows the relationship of the current closing price to its price range over a period of time. The indicator was developed in the late 1950s by George C. Lane, the president of Investment Educators Inc. The purpose of the Stochastic Oscillator – to identify price trends and reversals by tracking the position of closing prices within the recent series of highs and lows. Stochastic is constructed on the basis of the following regularity of the market price behaviour: at the uptrend, closing prices tend to the top of the price range, and at the downtrend – to the bottom, respectively. Stochastic was originally designed for market trading in a flat state; thus, it, like other types of Oscillators, functions quite well in the absence of any trend. Trend movements use the difference between the trend of the price chart and the indicator as a signal of a possible adjustment or reversal. Stochastic Formula Stochastic Oscillator consists of two lines – fast, %K, and slow, %D, and is displayed in a separate window under the price chart. Since the indicator is calculated as a percentage, with a fluctuations range…
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