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Slow Stochastic Oscillator

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Slow Stochastic Oscillator

 

Implication

  •     Bullish: %K and %D lines fall below and then rise above the 20 threshold, indicating bullish potential, along with a %K line cross above the %D line, triggering a bullish signal event if these 3 crossovers occur within a 5-day period.
  •     Bearish: %K and %D lines rise above and then fall below the 80 threshold, indicating bearish potential, along with a %K line cross below the %D line, triggering a bearish signal event if these 3 crossovers occur within a 5-day period.

Description

The slow stochastic oscillator compares two lines called the %K and %D lines to predict the possibility of an uptrend or a downtrend. In price charts, the %K line typically appears as a solid line, and the %D line appears as a dotted line. The slow stochastic oscillator can be used effectively to monitor daily, weekly or monthly periods.

According to Martin J. Pring, George Lane developed the stochastic oscillator with the premise that during an uptrend, the closing price tends to rise. However, when the uptrend matures, price tends to close towards the bottom of the price range for the period. Likewise, in a downtrend, the reverse holds true.

The difference between the slow and fast stochastic oscillators is the way that the %K and %D values are calculated. Slow stochastic are based on the moving averages values calculated for fast stochastic. As such, John J. Murphy writes that most traders favor slow stochastic because they tend to be more reliable.

Slow-Stochastic-Oscillator

%K

For slow stochastic, the %K value is based on a 3-period moving average of the %K fast stochastic value. See fast stochastic for information about the %K calculation.

%D

For slow stochastic, the %D value is based on a 3-period moving average of the %K slow stochastic value (described above).

Pring identifies that a way to differentiate the %K line from the %D line is to remember that %K represents “Kwick” movements, while %D shows movements that “Dawdle”. As such, Edwards and Magee note that “[ordinarily], the %K Line will change direction before the %D Line. However, when the %D line changes direction prior to the %K line, a slow and steady Reversal is often indicated.”

Trading Considerations

This section identifies that inform trading decisions using stochastic. It should be pointed out, that many technical analysts use stochastic in combination with other patterns or oscillators. John J. Murphy, for example, suggests that “[one] way to combine daily and weekly stochastic is to use weekly signals to determine the market direction and daily signals for timing. It’s also a good idea to combine stochastic with RSI.”

When you are using stochastic with price charts, keep the following factors in mind:

  • Extremes

When the %K line nears the 100% or 0% line a powerful move is set to occur. Some technical analysts equate the extremes with overbought or oversold conditions, and that prices cannot get any higher or lower. However, Edwards and Magee identify that this is not true in all situations, and that the extremes instead represent the strength of a price move.

  • Divergences

A divergence is said to have occurred when the price and oscillator trend lines move in different directions. A price reversal may follow.

  • Hinges

Lane referred to a flattened %K or %D line as hinges. A hinge may indicate that the uptrend or downtrend has become exhausted, and that a price reversal may occur.

  • Crossovers

When the price has reached 80 or higher, and a divergence has occurred, a crossover is the sell signal. To summarize Lane, Robert W. Colby writes that “the sell signal is more reliable when %D has already turned down when %K crosses below %D”.”

Similarly, when the price has reached 20 or lower, and a divergence has occurred, a crossover becomes the buy signal. Robert W. Colby writes that “the buy signal is more reliable when %D has already up down when %K crosses above %D”.”

Message for you(Trader/Investor): Google has the answers to most all of your questions, after exploring Google if you still have thoughts or questions my Email is open 24/7. Each week you will receive your Course Materials. You can print it and highlight for your Technical Analysis Training.

 

Technical Analysis Training (60 Days – Comprehensive Course)

Short-Term Chart Patterns (15 -Days)

Short-Term Chart Patterns: (7Days)

Gap Down Chart Pattern

Gap Up Chart Pattern

Gravestone Short-term Chart Pattern

Hammer Candle Stick Chart Pattern

Hanging Man Short-term Stock Chart Pattern

Inverted Hammer Stock Chart Pattern

Shooting Star Candle Stick Pattern

Bearish Short-Term Chart Patterns: (2Days)

Engulfing Line (Outside Bearish Reversal) Chart Pattern

Island Top Chart Pattern

Bullish Short-Term Chart Patterns: (6Days)

Engulfing Line (Bullish) Chart Pattern

Exhaustion Bar Chart Pattern (Bullish)

Inside Bar Chart Pattern

Island Bottom Chart Pattern

Key Reversal Bar (Bullish) Chart Pattern

Two Bar Reversal (Bullish) Chart Pattern

Indicators & Oscillators (Total – 11Days)

Bullish or Bearish Indicators: (3Days)

• Double Moving Average Crossover
• Price Crosses Moving Average
• Triple Moving Average Crossover

 

Bullish or Bearish Oscillators: (9Days)

 

• Bollinger Bands Oscillator
• Commodity Channel Index (CCI)
• Fast Stochastic Oscillator
• Know Sure Thing (KST) Oscillator
• Momentum Oscillator
• Moving Average Convergence/Divergence (MACD) Oscillator
• Relative Strength Index (RSI)
• Slow Stochastic Oscillator
• Williams %R Oscillator

Classic Chart Patterns (Total -29Days)

Bearish Classic Chart Patterns: (14Days)

 

• Continuation Diamond (Bearish) Chart Pattern
• Continuation Wedge (Bearish)
• Descending Continuation Triangle Chart Pattern
• Diamond Top Chart Pattern
• Double Top Chart Pattern
• Downside Break Chart Pattern – Rectangle
• Flag Bearish Chart Pattern
• Head and Shoulders Top Chart Pattern
• Megaphone Top Chart Pattern
• Pennant Bearish Chart Pattern
• Rounded Top Chart Pattern
• Symmetrical Continuation Triangle (Bearish)
• Top Triangle/Wedge Chart Pattern
• Triple Top Chart Pattern

Bullish Classic Chart Patterns: (15Days)

• Ascending Continuation Triangle Chart Pattern
• Bottom Triangle Or Wedge Chart Pattern
• Continuation Diamond (Bullish) Chart Pattern
• Continuation Wedge Chart Pattern (Bullish)
• Cup with Handle Bullish Chart Pattern
• Diamond Bottom Chart Pattern
• Double Bottom Chart Pattern
• Flag Bullish Chart Pattern
• Head and Shoulders Bottom Chart Pattern
• Megaphone Bottom Chart Pattern
• Pennant Bullish Chart Pattern
• Round Bottom Chart Pattern
• Symmetrical Continuation Triangle Bullish
• Triple Bottom Chart Pattern
• Upside Breakout Chart Pattern – Rectangle

Education and Extras (4Days)

• Motive (Impulse) Waves

• Corrective Waves
• Bullish Trend Reversals
• Bearish Trend Reversals
• Chart Pattern Statistics

This Completes the List of Courses.

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Wishing you a wonderful learning experience and the continued desire to grow your knowledge. Education is an essential part of living wisely and the Experiences of life, I hope you make it fun.

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