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A Technical Approach To Trend Analysis: Practical Trade Timing for Enhanced Profits by Michael C. Thomsett

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Stochastic Oscillator

The stochastic oscillator combines two moving averages calculated with high and low prices as well as closing prices over 14 consecutive sessions. The term stochastic refers to random probability, appropriately named with the use of two separate calculations to create an oscillator. The stochastic oscillator creates value between 0 and 100, with overbought conditions found above 80 and oversold below 20. In this regard, the stochastic oscillator is similar to RSI. It usually is a leading indicator because it is based partly on high and low price levels. Thus, for the analysis of some trends (especially primary trends), it often provides more useful and timely information than RSI.

The difference between RSI and the stochastic ...

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