Stochastic Oscillator

The stochastic oscillator is an indicator that shows where the latest close sits within the highest high and lowest low of a recent period, on a 0 to 100 scale.

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Last updated 27 October 2026

The stochastic oscillator is an indicator that shows where the latest closing price sits within the highest high and lowest low of a recent period, on a scale from 0 to 100. A close at the top of that range reads 100; a close at the bottom reads 0.

Traders use it to time entries: readings above 80 are called overbought and readings below 20 oversold.

How is the stochastic oscillator calculated?

The stochastic oscillator takes the distance from the lowest low to the close, divides it by the full high-low range of the period, and multiplies by 100. That gives %K; %D is a moving average of %K, and slowing smooths %K first.

MetaTrader 5's Stochastic Oscillator help page gives the lines as:

A price line above a stochastic oscillator panel scaled 0 to 100, with dashed lines at 80 and 20 marking the overbought and oversold zones and the %K and %D lines moving between them
The stochastic places each close within the recent high-low range: above 80 is overbought, below 20 oversold.

Worked example: stochastic oscillator on USDZAR

Over the last 14 daily candles, USDZAR's highest high is 18.5000 and its lowest low is 18.2000. Today it closes at 18.2600.

Step Calculation Result
Distance above the low 18.2600 − 18.2000 0.0600
Size of the range 18.5000 − 18.2000 0.3000
%K 0.0600 ÷ 0.3000 × 100 20

A %K of 20 means the close is one fifth of the way up the 14-day range. MetaTrader 5's help uses 80 and 20 as example levels, and a reading at or below 20 is often called oversold. In a strong trend the reading stays near one end for days, so traders take stochastic timing in the trend's direction: in an uptrend, %K crossing back above %D from below 20 times a buy.

How is the stochastic different from RSI?

RSI compares the size of recent gains with recent losses, while the stochastic compares the latest close with the recent high-low range. Both run from 0 to 100 and both are momentum oscillators, so they often move together. The RSI and stochastic lesson compares them on the same chart.

Divergence between price and either indicator is explained separately.

How do traders read the stochastic oscillator?

Traders read the stochastic with the trend, with settings that match their timeframe, and with most weight on %K and %D crosses inside the 80 and 20 zones. Readings in the middle of the scale carry less weight. Each habit is explained below.

How do you add the stochastic in MetaTrader 5?

In MetaTrader 5 you add the stochastic from Insert, Indicators, Oscillators, Stochastic Oscillator, or by dragging it from the Navigator onto a chart. It draws in a separate window below the price chart. Set the %K period, %D period and slowing in its properties, as described in the indicators help.

What do traders often get wrong about the stochastic?

The common mistake is reading a stochastic above 80 as a sign that price is about to fall. It means the close is near the top of the recent range, which is normal in a rising market. Traders wait for %K to cross below %D and the reading to drop back under 80 before treating it as sell timing.

Sources

Learn it properly in the full lesson: RSI: What the Relative Strength Index Shows, Plus Stochastic

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