Slow Stochastic Oscillator

The Slow Stochastic Oscillator applies a three-day simple moving average to the Fast Stochastic Oscillator in attempt to counterbalance the volatility that may exist in your results when you use the fast stochastic indicator. Like the Fast Stochastic Oscillator, the Slow Stochastic Oscillator is based on the hypothesis that price momentum can be used to identify and predict trends by comparing a security's recent closing price to its high and low closing prices over a given time period, usually 14 days.

The Slow Stochastic Oscillator will always produce results inside a zero to 100 range, where the numerical result represents the proximity of a security's closing price to its highest high or lowest low during the time period used. Some analysts believe that results near the high end of the range indicate accumulation, or buying pressure, and results near the low end of the range indicate distribution, or selling pressure. Using this theory, results above 80 are thought to indicate overbought levels for the security; results below 20 are thought to indicate oversold levels. If a security is overbought, prices may begin to decline. If a security is oversold, prices may begin to rise.

Calculation:

%K (slow) = y - period simple moving average of %K (fast)

Note: y defaults to a period of 3.

%D (slow) = 3 - period simple moving average of %K (slow)

The strategies described in this article are for information purposes only, and their use does not guarantee a profit. None of the information provided should be considered a recommendation or solicitation to invest in, or liquidate, a particular security or type of security. Investors should fully research any security before making an investment decision. Securities are subject to market fluctuation and may lose value.