Talk:Stochastic oscillator

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Contents 1 Copyright violation free rewrite 2 Corrections 3 Merger 4 Copyvio 5 Interpretation Section - clarification required

[edit] Copyright violation free rewrite

I rewrote it so there are no copyright violations. I cited the problematic aritcle with a footnote. Mrdthree 13:30, 5 February 2007 (UTC)

2 weeks have passed without discussion. The copyvio is unsupported vandalism. Mrdthree 02:29, 20 February 2007 (UTC)

[edit] Corrections

The numerator of the formula given on the 'article' page is incorrect. The numerator should be (closing price - pricelow). I think a better description of the Stochastic Oscillator is as described below:-

A technical momentum indicator that compares a security's closing price to its price range over a given period. The usual (or default period) is 14 days.

The formula for the Stochastic (%K) is:-

%K = 100 (C - L14) / (H14 - L14)

where: C = todays close H14 = the highest closing price over the 14 previous trading sessions L14 = the lowest closing price over the 14 previous trading sessions

%K therefore represents in percentage terms how far up from the low of the price range of the period in question, is the current closing price.

The theory behind the stochastic indicator is that during an uptrend prices tend to close near their 14 day high, and that in a downtrend prices tend to close near their 14 day low.

The %K value calculated by the above formula is strictly speaking a 'Fast Stochastic'. A signal line (%D) is calculated by taking a 3 period exponential moving average of the %K line. Buy signals are given when %K moves up through the %D line. Sell signals are given when %K moves down through the %D line.

Because the 'Fast Stochastic' is fairly volatile and prone to whipsaws, a Slow Stochastic is commonly used for trading. This is less volatile and less prone to giving false signals. The 'Slow Stochastic' is simply calculated as follows :-

Slow Stochastic %K = the Fast Stochastic signal line (ie, the Fast Stochastic %D) Slow Stochastic %D = 3 period exponential moving average of 'Slow Stochastic %K'

—Preceding unsigned comment added by 86.139.133.26 (talk • contribs) 01:44, 10 February 2006

Additional important information about Stochastics by George Lane: According to Lane you use the stochastics indicator with a good knowledge of "Elliot Wave Theory". A Center piece of his teaching is the divergence and convergence of trend lines drawn on stochastics as diverging/ converging to trend lines drawn on price cycles. Stochastics has the power to predict tops and bottoms. George Lane talks about the phenomena of "Three Rallies to the Top". In George Lane's video course "Stochastics For The Serious Trader" also makes the important point that the indicator needs to be properly structured in order to be a leading indicator. This structuring requires to observe price cycles of the instrument, and to set the the first number in the indicator to the simple moving average of the cycles you are going to be trading. This is absolutely crucial, but appears to be lost by most comments and articles published on the internet as of this date (1-6-2007).

—Preceding unsigned comment added by Cclars (talk • contribs) 00:54, 7 January 2007

[edit] Merger

I stuck tags to merge "Lane's stochastics" into here. I'm actually thinking of a title "Stochastics (technical analysis)" for the merged whole too. Although Lane is mentioned with the concept, I've not usually seen his name in the name of the osciallator. Rumour has it he may not have actually been the creator of the concept, so a neutral title could be best anyway. -- Kevin Ryde 00:47, 11 February 2006 (UTC)

[edit] Copyvio

All Rights Reserved. Copyright (c) Iseindia.com Pleclech 22:42, 3 February 2007 (UTC)

I have fixed the violation. please withdraw complaint (see temp page) Mrdthree 06:54, 14 February 2007 (UTC)

[edit] Interpretation Section - clarification required

The interpretation section describes the 2 oscillators %K and %D, however, the example chart shows 4 lines which are labelled %Kfast %Dfast, %Kslow, %Dslow. The article describes %K as 'fast' then the sma of %K (=%D) as 'slow'. Logically therefore %K is the fast oscillator and there is no explanation of the line %Kslow. It cannot be determined from the article what the difference is between %Kslow and %D nor cannot it be determined what the difference is between %Kfast and simply %K for example. In short you have 2 explanations but have created 4 definitions. It should be explained that %Dfast is the 3 period sma of %Kfast and that %Kslow is in fact ALSO the same 3 day sma of %Kfast ie %Kslow=%Dfast, and thence that %Dslow is a further smoothing by applying a 3 period sma to (the already smoothed) %Kslow. Thus there are only 3 indicators; the fundamental %K, its 3 period sma or D%fast and its 9 period sma or %Dslow.Convention and ease of use dictates the terminology %Kfast,%Dfast and %Kslow,%Dslow. Common practice has locked onto the use of 14 periods for calculating K and 3 period smoothing sma s, however, variations on these paramters are widely used. %K itself is seldom used in raw (unsmoothed)state and will often be slowed (ie. smoothed with a sma) with 2 different sma s - for example an 8 period sma and a 3 period sma to create 2 lines which are then monitored for buying and selling signals as described in the article. To fix this section you could simply delete the picture or add further description. It is only the picture that brings in further defined terms not mentioned in the article. G S Hayes 10:48, 31 August 2007 (UTC)

Why are the letters K and D used? Do they signify kitty and doggy, or kouphos and dusmathes, or were letters picked at random? The article would be improved if these letters were given meaning. Jm546 (talk) 00:16, 19 January 2008 (UTC)