Stochastic

As used by market technical analysts, a stochastic is an oscillator used to determine whether a market is overbought or oversold. It is best used in combination with other techniques which discern whether a market is in a trending or cyclical rotation mode. The stochastic consists of 2 lines, called %K and %D. A "slowed" version of the stochastics is usually called %Kslow and %Dslow. Crossings of the %K and %D lines represent signals of market movement. An n-interval stochastic is computed in TPA using

Hn = highest high for the last n intervals

Ln = lowest low for the last n intervals

C = close of the latest interval

n-interval %K = 100 x (C - Ln)/(Hn - Ln)

%D = m-point moving average of %K

%Kslow = %D

%Dslow = p-point moving average of %Kslow

The values of the numbers n, m and p can be chosen by the user using the Preferences Indic dialog, where they are referred to as "length," "%K -> %D" and "%D -> %D-slow," respectively. The default values are n=9, m=9, p=9.

In TPA, the intervals may be either periods or days .