Indicator - Stochastics
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Definition Stochastics
The first parameter is the number of days used to calculate %K, the second is the number of days to be considered for the moving average of %K (generally 1 for Fast Stochastic and 3 or 5 for Slow Stochastic), the third is the number of days to be considered for the moving average of %D.
Interpretation Stochastics
It is an overbought/oversold indicator depending on its position relative to the 0 level.
It also gives good divergence signals.
A bullish divergence occurs when the stock price makes new lows while the Stochastic fails to make new lows.
A bearish divergence occurs when the stock price makes new highs while the Stochastic fails to make new highs.
