Fast Stochastic %K Change Direction

The Fast Stochastic Oscillator is a technical analysis tool used to measure the momentum of a stock's price movement. This is done by comparing the latest closing price of the stock with its highest and lowest prices over a specific period, typically 14 periods.

Calculation of the Fast Stochastic involves finding the difference between the latest closing price and the lowest price over the specific period, dividing that by the difference between the highest and lowest prices over the same period, and multiplying by 100 to produce a percentage value between 0 and 100.

Traders use the Fast Stochastic to identify if a stock is overbought or oversold. When the Fast Stochastic rises above 80, the stock is overbought, while a fall below 20 indicates oversold conditions. This information can be useful in identifying potential price reversals or corrections in the stock's price.

This strategy is based on Fast Stochastic Oscillator %K (black line). If %K changes direction upwards i.e. FS%K(t-2)>FS%K(t-1) < FS%K(t) then a buy signal is generated. A sell signal is generated when %K changes direction downward i.e. FS%K(t-2)<FS%K(t-1) > FS%K(t), where FS%K(t) is a current value of Fast Stochastic %K, FS%K(t-1) is yesterdays value Fast Stochastic %K and FS%K(t-2) is a value of Fast Stochastic %K two days ago.

Formula

IF STO%K changes direction upward
THEN GO LONG
IF STO%K changes direction downward
THEN GO SHORT
where STO%K is %K fast stochastic oscillator;

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