Hi,
For those of you who use the stochastic oscillator for trading, I had a question about the stochastic oscillator.
I understand that %K is the current price in relation to the past range of N periods, and %D is the average of the past N %K values.
When the %K line and %D line crossover, this is regarded as a "signal". I am wondering, what does stochastic %K and %D lines crossing really mean and why should this be regarded as a signal?
In a literal sense, the %K line crossing over the %D line means the current price is moving above or below it's average. But so what? Is there any deeper significance to the current value moving above or below it's average of the past number of periods?
Also, stochastic is regarded as a "momentum" indicator, but not really understanding how it gauges momentum from a mathematical perspective.
If anyone could offer their insight that would be great. Thanks!
For those of you who use the stochastic oscillator for trading, I had a question about the stochastic oscillator.
I understand that %K is the current price in relation to the past range of N periods, and %D is the average of the past N %K values.
When the %K line and %D line crossover, this is regarded as a "signal". I am wondering, what does stochastic %K and %D lines crossing really mean and why should this be regarded as a signal?
In a literal sense, the %K line crossing over the %D line means the current price is moving above or below it's average. But so what? Is there any deeper significance to the current value moving above or below it's average of the past number of periods?
Also, stochastic is regarded as a "momentum" indicator, but not really understanding how it gauges momentum from a mathematical perspective.
If anyone could offer their insight that would be great. Thanks!