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2017issue C0512-17

Constructing a dual EMA stochastic from range normalization

A dual EMA stochastic places a short exponential moving average and a long exponential moving average inside the high-low range of the longer average. Both lines share one range window, and a relative strength index is plotted beside the pair so the oscillators can be compared rather than substituted.

  • The stochastic oscillator is treated as a range-normalization template that places a chosen series inside its own high-low window and rescales the result.
  • A short exponential moving average and a long exponential moving average become the two series fed into that template, forming a fast line and a slow line.
  • Both lines share the same denominator from the longer average's range window. The fast line is unbounded, and the slow line stays between 0 and 100.
  • A relative strength index is plotted on the same series as a comparison panel, not as an input to the constructed pair.
Entries in this reading3 entries
Current trackStochastic oscillator170 readingsRelative Strength Index186 readingsMoving average449 readings

What the construction does

The dual EMA stochastic is a constructed pair. A short exponential moving average and a long exponential moving average are each located inside the high-low range of the longer average over a chosen lookback.

The stochastic oscillator is the range-normalization template for that placement. A moving average is a smoothed level of an ordered price series. Here the short and long exponential averages become the two series fed into the template.

Shared range window and the two numerators

Both lines share the same denominator: the highest minus lowest 26-period average over 19 periods. The ratio is then multiplied by 100.

The fast line puts the 12-period average in the numerator. The slow line puts the 26-period average in the numerator. Typical lengths are 12, 26, and 19, and those lengths may be replaced to match a different sampling style.

The range window is the number of periods used to take the highest and lowest values of the longer average. In the typical set that window is 19 periods.

How the fast line and slow line print

When the 12-period average is above the 26-period average, the fast line prints above the slow line. The ranking reverses when the short average is below the long average.

The fast line is unbounded and can print above 100 or below 0. The slow line stays between 0 and 100. The centerline at 50 marks the midpoint of the longer average's range and is also used as a confirmation threshold for either line.

Slow-line extremes near 90-100 and 0-10 mark the longer average at the top or bottom of its 19-period range. The fast line commonly travels between about -50 and 150.

A comparison panel, not a substitute

A 14-period relative strength index is plotted beside the constructed pair on the same series so the two oscillators can be compared rather than substituted for each other.

The relative strength index is a separate bounded momentum oscillator. It is not an input to the dual EMA stochastic.

A stated regime reading treats a slow line above 90 with a fast line near 150 as one pole, and a slow line below 10 with a fast line below -50 as the opposite pole.

Seeding and replaceable lengths

Each exponential average is seeded with a simple average, so a short spreadsheet window can differ from a longer chart lookback of the same formulas.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
36 of 42 in the Stochastic oscillator track
201816-24 pp.Next on Stochastic oscillatorConstructing a two-stage stochastic RSI for comparable price-oscillator divergencesThe relative-strength-index uses one lookback to compare recent gains with recent losses and maps that comparison onto a 0-to-100 scale.
All readings on this track · 42 readings
  1. 1987Stochastic fast and slow construction as a rebuildable stack
  2. 1989Building the stochastic oscillator from close location
  3. 1990Monthly stochastics as a multi-year bond regime filter
  4. 1990Walk-forward screen for yen indicator rules
  5. 1990Slow stochastic construction for index pullback entries
  6. 1991Random Walk Index construction with an adaptive lookback
  7. 1991Building a two-stage stochastic oscillator from close location
  8. 1992Constructing fast and slow stochastic oscillator lines
  9. 1992Constructing nested stochastic lookbacks
  10. 1994Construct the four-state price-volume rank before filtering it
  11. 1996Crowded stochastics, false breakouts, and hidden stops
  12. 1997Fade and follow entries from stochastic extremes
  13. 1998Oversold confirmation as a staged rule-based-entry case
  14. 1999Constructing regular and slow stochastic oscillators
  15. 2001Construct a variable-interval simple moving average from stacked extremes
  16. 2001Threshold RSI and stochastic setups with next-bar stops
  17. 2001Two tests of a rate-adjusted earnings-yield gap
  18. 2002Constructing a two-line stochastic from a range-normalized close
  19. 2002Inspect mechanical stochastic daytrade rules on one bar
  20. 2003Constructing an adaptive stochastic RSI
  21. 2003Four parameters that construct a stochastic oscillator
  22. 2004Volume breakout as signal, pullback as entry
  23. 2004A first currency-market checklist with two averages and a slow stochastic
  24. 2005Shared-scale cycle indexes with companion oscillators
  25. 2005Current-bar versus prior-bar range construction for the stochastic oscillator
  26. 2005Two-session moving-average pullback short
  27. 2006Market condition as a permission layer for moving averages and oscillators
  28. 2008Lock the stop at support before sizing a stochastic entry
  29. 2010Construct a center-line volume oscillator and read it with a stochastic oscillator
  30. 2010Sharpened RSI turns with rainbow averages and a slow stochastic
  31. 2011Build a Spearman rank oscillator from ordered closes
  32. 2012Gold as a regime-dependent hedge in the euro-area crisis
  33. 2012Pairing moving averages with variable-length stochastics
  34. 2014Two-leg stochastic stress oscillator as a rebuild drill
  35. 2014Ingress dates as price bases for relative strength, stochastics, and moving averages
  36. 2017Constructing a dual EMA stochastic from range normalization
  37. 2018Constructing a two-stage stochastic RSI for comparable price-oscillator divergences
  38. 2018Combining a weekly stochastic, a long moving average, and two-day resistance
  39. 2018Weekly and daily stochastic readings with a long moving average and support
  40. 2018A confirming workflow for rotating from discretionary to staples
  41. 2019Stochastic scan thresholds, averages, and formula syntax
  42. 2020Constructing Slow %K as a two-stage helper
By fieldIndicators and filters682 readingsBy year2017100 readings
All 170 readings tagged Stochastic oscillator
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1987Stochastic fast and slow construction as a rebuildable stack1990Walk-forward screen for yen indicator rules2001Construct a variable-interval simple moving average from stacked extremes2005Shared-scale cycle indexes with companion oscillators2006Market condition as a permission layer for moving averages and oscillators