Stochastic Oscillator - Discussing the Different Signals it can Generate Part 1
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Its been stated that the important role the stochastic oscillator can play in identifying overbought and oversold levels because it is range bound. This range – from 0 to 100 – will remain constant, no matter how quickly or slowly a security advances or declines. Considering the most traditional settings for the oscillator, 20 is typically considered the oversold threshold and 80 is considered the overbought threshold. However, the levels are adjustable to fit security characteristics and analytical needs. Readings above 80 indicate a security is trading near the top of its high-low range; readings below 20 indicate the security is trading near the bottom of its high-low range.
Below is a summary of the signals it can present.
High Bullish Momentum - Above 80
High Bearish Momentum - Below 20
Overbought + Confirmation (Turning Point)
Oversold + Confirmation (Turning Point)
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Its been stated that the important role the stochastic oscillator can play in identifying overbought and oversold levels because it is range bound. This range – from 0 to 100 – will remain constant, no matter how quickly or slowly a security advances or declines. Considering the most traditional settings for the oscillator, 20 is typically considered the oversold threshold and 80 is considered the overbought threshold. However, the levels are adjustable to fit security characteristics and analytical needs. Readings above 80 indicate a security is trading near the top of its high-low range; readings below 20 indicate the security is trading near the bottom of its high-low range.
Below is a summary of the signals it can present.
High Bullish Momentum - Above 80
High Bearish Momentum - Below 20
Overbought + Confirmation (Turning Point)
Oversold + Confirmation (Turning Point)
