What is Stochastic?
The Stochastic Oscillator measures where the most recent close sits relative to a selected lookback range. It produces values between 0 and 100.
What does it measure?
The position of the close within the recent trading range rather than the absolute amount of price change.
How is it calculated?
%K compares the latest close with the lookback low and high. %D is a smoothed average of %K.
Common interpretation.
- High readings indicate that price is closing near the upper part of its recent range.
- Low readings indicate closes near the lower part of the range.
- Extreme readings can persist during strong trends.
- %K and %D crossovers describe changes in short-term momentum.
How traders use it for market context.
- Stochastic readings can provide additional context when futures are rotating inside a defined range.
- Trend and session context remain important because oscillator extremes behave differently in directional markets.