Formulated by George Lane in the later end of the 50s, the Stochastic Oscillator is a technical momentum indicator that demonstrates the emplacement of the close in relation to the high-low array across a fixed amount of periods.
Analysts say that the stochastics follows the acceleration (or opposite) and the momentum of price. The momentum sometimes changes direction ahead of the price. Therefore , the bullish and bearish deviations of the Stochastic Oscillator could be applied to forecast reversals.
This comprised the foremost signal that Lane distinguished. Lane likewise employed this oscillator to describe bull and bear set-ups to look for a later reversal. Since the Stochastic Oscillator is range bound, is likewise of value for distinguishing overbought and oversold areas.