Stochastic Oscillator
What is it?
What it measures:
Compares a closing price to its price range over a given period to assess momentum and overbought/oversold levels.
How to interpret it:
- Crossovers in Extreme Zones: %K crossing above %D while below 20 triggers a strong buy signal.
- Overbought/Oversold: Readings above 80 signal overbought conditions; below 20 signal oversold levels.
Used for:
- Mean-reversion trading and pinpointing short-term turning points.
Limitations:
- Can remain pinned in extreme zones during strong multi-month trends.