Stoch

How do I read Stoch?

• Above 80 = overbought. The close is in the upper 20% of the recent range. Mean-reversion risk is elevated, but in trends Stochastic can stay above 80 for many bars without reversing.
• Below 20 = oversold. The close is in the lower 20% of the recent range. Bounce candidate, with the same trending-market caveat.
• %K crossing above %D in the oversold zone = textbook long trigger. Crossing below %D in overbought = exit/short trigger.
• %K and %D direction agreement matters: both rising = strengthening bullish momentum; both falling = weakening. Disagreement = unclear regime.
• Bullish divergence (price lower low, %K higher low) = waning downside momentum. Same logic in reverse for bearish divergence.
• Stochastic responds faster than RSI to recent price changes — better for short timeframes, but more prone to false signals in choppy markets.

What are the default Stoch settings?

How do I code Stoch in Pine Script?

//@version=5
indicator("Stochastic Example", overlay=false)

lengthK = input.int(14, title="%K Length",     minval=1)
smoothK = input.int(3,  title="%K Smoothing",  minval=1)
smoothD = input.int(3,  title="%D Smoothing",  minval=1)

k = ta.sma(ta.stoch(close, high, low, lengthK), smoothK)
d = ta.sma(k, smoothD)

plot(k, title="%K", color=color.blue,   linewidth=2)
plot(d, title="%D", color=color.orange, linewidth=2)
hline(80, "Overbought", color=color.red,   linestyle=hline.style_dashed)
hline(20, "Oversold",   color=color.green, linestyle=hline.style_dashed)

Pine's ta.stoch() returns the raw %K only — you smooth it yourself with ta.sma(). Setting smoothK=1 gives you Fast Stochastic; smoothK=3 gives the more common Slow Stochastic. Plotting both %K and %D with horizontal lines at 80/20 makes the standard crossover-in-extreme-zone setup visually obvious.

How is Stoch calculated?

Stochastic compares the current close to the trading range over the lookback period, on a 0–100 scale. A signal line smoothed from %K provides crossover triggers.

1. 1.Identify the highest high and lowest low over the past 14 bars.
2. 2.Compute the raw %K = 100 × (close − lowest_low) / (highest_high − lowest_low).
3. 3.%K = 0 means the close is at the period low; %K = 100 means at the period high; %K = 50 is the midpoint.
4. 4.Compute the %D signal line as a 3-bar simple moving average of %K.
5. 5.Crossovers between %K and %D, especially in overbought (above 80) or oversold (below 20) zones, are the standard timing signals.

When does Stoch fail?

What mistakes do traders make with Stoch?

• Buying every oversold crossover. In strong downtrends, Stochastic prints oversold for dozens of bars while price keeps falling. Always check the trend regime first.
• Ignoring %K/%D agreement. A %K crossing %D when both are flat means very little; both rising or both falling adds confidence. Direction-of-both filters out roughly half of marginal crosses.
• Treating divergences as instant entries. Divergences signal momentum exhaustion but do not pinpoint reversal timing. Wait for price confirmation before trading them.
• Using Fast Stochastic on noisy markets. Raw %K (Fast Stoch) whips around in choppy conditions. Slow Stochastic (3-period smoothing on %K) cuts most of the noise without sacrificing meaningful signals.
• Not adjusting thresholds for trend regimes. Hardcoding 80/20 gives many false signals in trends. In strong uptrends, raising overbought to 90 (or ignoring overbought signals entirely) is more profitable.

How does Stoch compare to similar tools?

Stoch FAQ

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