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Stochastic indicator is commonly used. It takes part in oscillator classification because it shows that markets are in the purchase area or selling area. The indicator, which is improved by George C. Lane, is showed with two curves that is named as %K and %D. Curve %K is master curve, and it generally expressed with unbroken line. Curve %D is simple moving average of curve %K , and it generally expressed with dotted line. Investors can choose period of time which they want for stochastic oscillator. However, hit rate of signals ,which is produced by the indicator, declines for too short time. Because of that, five days time period, which is used by analysts, is suggested like creator of the oscillator George C. Lane.


Being level 20 and less than is interpreted as oversold, and being level 80 and more is interpreted as overbought. These approaches produce faulty signals from time to time, so %K line need to cut %D line, in addition to being less than level 20 for buying. For selling, being more than level 80 is necessary.

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