Four parameters that construct a stochastic oscillator

A range-relative close

A stochastic oscillator locates a close inside the high-low range observed over a chosen lookback rather than treating price as an absolute level. That rangeRelativeClose reading is what the rest of the construction is built to report.

percentK is the primary oscillator series that places the latest close inside the high-low range of a chosen lookback. A percentK reading of 50 means the close sits at the midpoint of the lookback range. A reading of 0 means the close is at the range low.

Four construction inputs

Construction specifies four inputs: the percentK lookback, the percentK slowing length, the percentD averaging length, and the averaging method used to form percentD.

Fast and slow percentK

kSlowing is an internal smoother applied to percentK. A slowing length of 1 is the fast construction. A slowing length of 3 is the slow construction because the latter adds internal smoothing to percentK.

PercentD as a derived smoother

percentD is a moving average of percentK, so the secondary line is a derived smoother of the primary range-relative series. percentD serves as the secondary, slower companion line.

The percentD averaging method may be chosen from several moving-average families, including simple, exponential, weighted, triangular, variable, and time-series forms.

Two lines and three reading conventions

The usual display uses two lines, with percentK as the primary series and percentD as the secondary overlay.

Common reading conventions include thresholdRecross, which watches either line leave and then re-enter a chosen high or low band; lineCross, which watches percentK move above or below percentD; and divergenceScan, which compares oscillator direction with price direction before treating a signal as complete.