# The Stochastic Indicator

The Stochastic Trading Indicator is a technical analysis tool that is used by traders to identify potential entry and exit points in the market. It is based on the concept of stochastic oscillators, which are indicators that measure the relationship between an asset's closing price and its price range over a specified period of time. The Stochastic Trading Indicator is a widely used and popular tool among traders, and it can be a useful addition to any trading strategy.

The Stochastic Trading Indicator is a technical analysis tool that is used by traders to identify potential entry and exit points in the market. It is based on the concept of stochastic oscillators, which are indicators that measure the relationship between an asset's closing price and its price range over a specified period of time. The Stochastic Trading Indicator is a widely used and popular tool among traders, and it can be a useful addition to any trading strategy.

#### What is the Stochastic Trading Indicator?

The Stochastic Trading Indicator is a momentum oscillator that measures the relationship between an asset's closing price and its price range over a specified period of time. It is calculated by dividing the difference between the asset's closing price and its low price over a certain period by the difference between its high and low prices over that same period. The resulting value is then plotted as a line on a scale from 0 to 100, with values above 80 indicating an overbought market, values below 20 indicating an oversold market, and values between these levels indicating neutral conditions.

#### Where did the Stochastic Trading Indicator come from?

The Stochastic Trading Indicator was developed in the 1950s by George Lane, a financial analyst and technical trader. Lane was interested in finding a way to identify potential turning points in the market and developed the Stochastic Trading Indicator as a tool to do so. His work laid the foundation for the development of many other technical analysis tools and techniques that are widely used by traders today.

#### How is the Stochastic Trading Indicator calculated?

The Stochastic Trading Indicator is calculated using the following formula:

%K = 100 * (Current Close - Lowest Low) / (Highest High - Lowest Low)
%D = 3-day SMA of %K

In this formula, %K is the Stochastic Trading Indicator line, and %D is a smoothing line that is used to smooth out the fluctuations in the %K line. The Stochastic Trading Indicator is typically plotted as two lines on a chart, with the %K line representing the current value of the indicator and the %D line representing the smoothed value.