Stochastic Oscillator

25 August 2009 @ 03:33 pm EDT

The Stochastic Oscillator is plotted on a scale from 0 to 100. The upper and lower lines (marking the overbought and oversold levels) are at the 80 and 20 levels. In other words, readings above 80 are overbought levels, while readings below 20 are oversold levels. One added feature of the Stochastic Oscillator is that there are two oscillator lines instead of one. (The slower line is usually a 3-day moving average of the faster line). Trading signals are given when the two lines cross. A buy signal is given when the faster line crosses above the slower line from below 20.A sell signal is given when the faster line crosses beneath the slower line from above 80.The time period used by most chart analysts is fourteen days.

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