Stochastic Oscillator and Stochastic RSI
An oscillator comparing a closing price to its recent high-low range, and a variant that applies the same formula to RSI instead of price.
The Stochastic Oscillator, developed by George Lane, compares a closing price to its trading range (high to low) over a set lookback period, scaled from 0 to 100, based on the observation that price tends to close near its recent high in an uptrend and near its recent low in a downtrend.
Stochastic RSI applies that same stochastic formula to RSI values instead of to raw price, producing a more sensitive, faster-reacting oscillator than either the standard Stochastic Oscillator or RSI alone — and correspondingly more prone to short-term noise. See Kaavon's dedicated article for the full calculation of both.
Examples
- A Stochastic Oscillator reading above 80 is commonly discussed as overbought, and below 20 as oversold, similar in spirit to RSI's thresholds.
- Stochastic RSI reacts faster and more sensitively than the standard Stochastic Oscillator, since it's calculated from RSI's own already-processed values rather than raw price.