Forex glossary
Stochastic Oscillator
The stochastic oscillator locates the close within a selected high–low window. Fast %K = 100 × (C−L)/(H−L) for a positive range; %D and slow variants add smoothing. The 80/20 thresholds are interpretive conventions; the 0–100 scale describes position rather than the probability of a future move.
Illustrative example
How does it work in practice?
Assume a window low of 100 USD, high of 110 and close of 104. Unsmoothed fast %K is forty; additional smoothing can make the displayed %K or %D differ from that raw value.
A case to work through
Close at the range midpoint
A hypothetical window has L=40, H=60 and close=50.
- Raw fast %K=100×(50−40)/(60−40)=50.
- Smoothed lines use additional observations and can differ from 50.
What follows? Check the version and settings before comparing readings.
Example boundary: If H=L, the ratio is undefined without an additional implementation rule.
A useful distinction
Stochastic Oscillator / Relative Strength Index (RSI)
Stochastic measures the close's range position; RSI compares smoothed change magnitudes.
Check your understanding
Calculate fast %K with a positive range.
Show the answer and explanation
75
Close is 15 units above Low in a 20-unit range: 100 × (25 − 10) / (30 − 10) = 75. This is raw %K before smoothing.
Oscillators without mixed scales
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Read the fuller explanation
Related terms
Sources and documentation
- MetaTrader 5 – stochastic
Close position within a high/low range and additional %K/%D smoothing.
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The example illustrates the mechanism. Check current account conditions and instrument specifications with the provider.