In technical analysis of securities trading the "stochastic indicator" is a "momentum indicator" that uses support and resistance levels. Dr. George Lane developed this indicator in the late 1950s. The term stochastic refers to the point of a current price in relation to its price range over a period of time. This method attempts to predict price turning points by comparing the closing price of a security to its price range.
The 5-period stochastic oscillator in a daily timeframe is defined as follows:
where H5 and L5 are the highest and lowest prices in the last 5 days respectively, while %D is the 3-day moving average of %K (the last 3 values of %K). Usually this is a simple moving average , but can be an exponential moving average for a less standardized weighting for more recent values. There is only one valid signal in working with %D alone — a divergence between %D and the analyzed security."
"in reality the "stochs" are just the rank of price plus a "sma" and have no predictive powers and are only a lagging description of price which helps with providing some context but treating it as anything more has led many to make wrong assumptions based on its direction or its value. "
The term stochastic is from the "stochastic process" which is a random process that can be defined as a collection of random variables that is indexed by some mathematical set, meaning that each random variable of the stochastic process is uniquely associated with an element in the set.
Which makes the use of the term by Dr . George Lane pretty ironic.
"This indicator is an attempt to improve upon the concept by sampling more of the data and combining multiple ranks to have a more accurate picture of price movement. Also hopefully to educate people about its shortcomings as well.
The concept was inspired by a crypto youtuber but we wanna make sure the community understands that this is not a "copy" its merely a "bioequivalent" made from diligent and methodical reverse engineering . so please if you use this and still wanted to purchase it please refer to the closed source equivalent.
We hope the community gets a kick out of it but more importantly get a different perspective on the mechanics of the stochastic oscillator. We also encourage modification and reuse of the code since we passed on a few ideas for exact graphical duplication. "
BUY EXAMPLES:
SELL EXAMPLES:
The 5-period stochastic oscillator in a daily timeframe is defined as follows:
where H5 and L5 are the highest and lowest prices in the last 5 days respectively, while %D is the 3-day moving average of %K (the last 3 values of %K). Usually this is a simple moving average , but can be an exponential moving average for a less standardized weighting for more recent values. There is only one valid signal in working with %D alone — a divergence between %D and the analyzed security."
"in reality the "stochs" are just the rank of price plus a "sma" and have no predictive powers and are only a lagging description of price which helps with providing some context but treating it as anything more has led many to make wrong assumptions based on its direction or its value. "
The term stochastic is from the "stochastic process" which is a random process that can be defined as a collection of random variables that is indexed by some mathematical set, meaning that each random variable of the stochastic process is uniquely associated with an element in the set.
Which makes the use of the term by Dr . George Lane pretty ironic.
"This indicator is an attempt to improve upon the concept by sampling more of the data and combining multiple ranks to have a more accurate picture of price movement. Also hopefully to educate people about its shortcomings as well.
The concept was inspired by a crypto youtuber but we wanna make sure the community understands that this is not a "copy" its merely a "bioequivalent" made from diligent and methodical reverse engineering . so please if you use this and still wanted to purchase it please refer to the closed source equivalent.
We hope the community gets a kick out of it but more importantly get a different perspective on the mechanics of the stochastic oscillator. We also encourage modification and reuse of the code since we passed on a few ideas for exact graphical duplication. "
BUY EXAMPLES:
SELL EXAMPLES: