This indicator was developed by George Lane and shows the location of the close relative to the high-low of the price range over a set number of periods. This indicator attempts to predict market turning points by identifying overbought and oversold conditions.
The Stochastic Oscillator is calculated by the following formula
%K = 100 * (P - L(n))/(H(n)-L(n))
%D = SMA of %K,
P - current market price
L (n) - low for the last “n” periods
H (n) - high for the last “n” periods
Stochastic Oscillator is generating the following signals: