Stochastic Oscillator is a tool for decoding price trend changes

Many traders know that Stochastic Oscillator is a commonly used indicator. But when asked how to adjust its settings to get desired results, they often hesitate. This article will delve into what power this type of oscillator has, how to set it up for practical use, and how to combine it with other tools to minimize false signals.

What can the Stochastic Oscillator do?

The Stochastic Oscillator is a tool that indicates the current closing price’s position within the highest-high and lowest-low range by displaying a value between 0-100. Simply put, it shows “how expensive is this price compared to the past 14 days.”

Benefits traders use:

• Identify trend reversal points when prices are overbought or oversold
• Trade within a range effectively by buying when oversold and selling when overbought
• Detect price momentum by observing the gap between %K and %D
• Anticipate conflicting signals that often occur before profit opportunities are lost

How this Oscillator ( works simply )

Calculation formula: