Technical indicator

Slow Stochastic Oscillator

The Slow Stochastic Oscillator is a smoothed version of the Fast Stochastic Oscillator. It measures the same thing – the close relative to the recent high–low range – but produces fewer, more reliable signals.

Type

Momentum oscillator (0–100)

Typical parameters

n₁ = 5 or 14, n₂ = 3 or 5

Main signal

%K crosses %D, or leaves the 20/80 zones

How it differs from the fast stochastic

Instead of using a single day’s distance from the lowest low, the Slow Stochastic sums the distances and the ranges over several days before dividing. Averaging the lowest lows and highest highs this way removes much of the day-to-day jitter of the fast version.

Calculation

where the sums run over the last n₂ days, L_n1 and H_n1 are the lowest low and highest high of the last n₁ days, and SMA is a simple moving average. An equivalent common definition takes a 3-day SMA of the fast %K as the slow %K.

Trading signals

• Level signals: buy when %K or %D falls below 20 and turns up; sell when %K or %D rises above 80 and turns down.
• Crossover signals: buy when %K crosses above %D; sell when %K crosses below %D.