Stochastic Overview

The Stochastic Oscillator measures where the current close sits relative to the high-low range over n periods, on a 0-100 scale. Close near the high = high stochastic (overbought), close near the low = low stochastic (oversold).

The key insight behind stochastic is that in uptrends, prices tend to close near their highs, and in downtrends, near their lows. When this pattern breaks (closing near lows in an uptrend), momentum may be shifting.

How Stochastic Oscillator Works

Core Concept

Calculate Stochastic value from the input price/volume data
Apply smoothing if applicable
Compare to threshold or signal line for signal generation
Interpret: Signals indicate momentum direction or extremes

Key Characteristics:

Momentum Indicator = Measures momentum direction and strength
Signal Line Available = Yes
Bounded = Yes (0 – 100)

Visual Interpretation

Stochastic Behavior:

Overbought — potential reversal or short entry
Oversold — potential reversal or long entry
Signal line crossovers provide timing signals

Trading Signals Available on Reversion

These are the signal names you select when configuring Stochastic in the algorithm builder or via the MCP agent:

Signal	Triggers When	Typical Use
`stoch_overbought`	Stochastic value rises above threshold (e.g., 80)	Overbought — potential reversal or short entry
`stoch_oversold`	Stochastic value falls below threshold (e.g., 20)	Oversold — potential reversal or long entry
`stoch_above_signalLine`	Stochastic crosses above its signal line	Bullish momentum crossover
`stoch_below_signalLine`	Stochastic crosses below its signal line	Bearish momentum crossunder

Display: Separate pane

Category: Momentum

Threshold range: 0 – 100

Key Characteristics

What Stochastic Oscillator Does Well:

Clear Overbought/Oversold Signals
Combines well with trend filters
Signal line crossovers signals for entry timing