| Description | A popular oscillator for detecting oversold/overbought conditions, the fast and slow stochastics uses recent extreme highs and lows, over the specified last days, in relation to the most recent close to determine these conditions. The two components of either the Fast Stochastic or the Slow Stochastic are the %K and the %D. The %K, or fast signal examines the difference between the most recent close and the extreme low versus the difference between the extreme high and low over the specified period. The %D, or slow line, is a moving average of the %K line. The difference between the Fast Stochastic and the Slow Stochastic depends on a slowing factor. The slowing factor, usually 3, is applied to the %K to smooth, or slow the signal down. Common buy interpretations of the stochastics involve watching when one of the lines falls below 20 and then rises above that value. Another popular method involves buying when the faster %K line rises above the slower %D and then selling on the next crossover (%K falls back below the %D.) |
