# Stochastics

Stochastics

- Stochastics Fast & Slow
- Stochastic Buy & Sell Signals
- Stochastic Price Divergences

### Stochastic Fast

Stochastic Fast plots the location of the current price in relation to the
range of a certain number of prior bars (dependent upon user-input, usually
14-periods). In general, stochastics are used to **measure overbought and oversold
conditions**. Above 80 is generally considered overbought and below 20 is considered
oversold. The inputs to Stochastic Fast are as follows:

**Fast %K**: [(Close - Low) / (High - Low)] x 100**Fast %D**: Simple moving average of Fast K (usually 3-period moving average)

### Stochastic Slow

Stochastic Slow is similar in calculation and interpretation to Stochastic Fast. The difference is listed below:

**Slow %K**: Equal to Fast %D (i.e. 3-period moving average of Fast %K)**Slow %D**: A moving average (again, usually 3-period) of Slow %K

The **Stochastic Slow is generally viewed as superior** due to the smoothing
effects of the moving averages which equates to less false buy and sell signals.
A comparison of the two stochastics, fast and slow, is shown below in the chart
of the Nasdaq 100 ETF (QQQQ):

As will be shown on the next page, Stochastics offer clear buy and sell signals and help in determining overbought or oversold price conditions.

Next Page - Stochastic Buy & Sell Signals