Grasping the math behind the stochastic oscillator

George Lane developed the stochastic oscillator in the late 1950s. The math behind it is pretty remarkable for an indicator some 50 years old. There are actually two readings for a stochastic oscillator that are combined on a chart. They're referred to as the slow (%D) and the fast (%K) stochastics. The slow one is generally a moving average of the fast one.

The formulas for the slow and fast stochastic oscillators are as follows:

^ Fast Stochastic:

%K = 100 x (Recent Close - Lowest Low(n) * Highest High(n) -Lowest Low(n))

N = number of periods used in calculation ^ Slow Stochastic:

%D = 3-period moving average of %K

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