Stochastic Oscillator: Using it correctly is the key to making money; this article explains it thoroughly.

GasFeeCrybaby · 2025-12-24T10:01:43+00:00

Stochastic Oscillator (STO) is a momentum indicator that compares the current closing price with the high and low of the past 14 periods, generating a value between 0-100 to help traders determine whether the price is overbought or oversold. It consists of the %K line and the %D line, with the former reflecting real-time strength and the latter serving as a smoothing line. Understanding these signals can help traders make more effective decisions.

GasFeeCrybaby

2025-12-24 10:01:43

Abstract generation in progress

Many traders are using Stochastic Oscillator (STO), but not many truly understand it or use it well. Today, let’s get straight to the point and teach you how to profit from signals generated by STO.

STO actually tells you: Is the price expensive now?

What is the Stochastic Oscillator? In simple terms, it is a momentum indicator that compares the current closing price to the high-low range over the past 14 periods, generating a value between 0-100.

Remember these two key phenomena:

Uptrend: The price keeps making new highs, closing near the high of the period, so STO approaches 100
Downtrend: The price keeps making new lows, closing near the low of the period, so STO approaches 0

This is why traders use STO to determine whether the price is overbought (>80) or oversold (<20).

The secret of the two lines: %K and %D

STO consists of two lines:

%K: The core data line, reflecting the real-time strength of the price
%D: The 3-day moving average of %K, acting as a smoothing line

The calculation formula is very simple:

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