3 Types of Stochastic Indicators

Stochastic: Fast, Slow, and Full Readings

Three types of Stochastic Oscillator Indicators exist: fast, slow, and full stochastic oscillators.

All three kinds of this stochastic oscillator indicator look at a certain time, like 10 days, and see how today's price compares to the highest and lowest prices during that time when figuring out the stochastic oscillator in trading.

The stochastic oscillator works on this idea.

During an upward trend, stock price action tends to close at the high of the candle.
During a downwards trend, stock price action tends to close at the low of the candlestick.

The Stochastic Oscillator indicates the strength of trends and identifies moments when a trade is oversold or overbought.

Fast Stochastics Indicator

The Fast Stochastic Indicator represents a trading tool that illustrates two lines - one solid and one dashed - within the indicator area. These lines are referred to as the %K line and the %D line. In this iteration, the calculation methods for the %K and %D lines differ from previous versions, providing a smoothing effect.

One drawback of this fast stochastic stock indicator is that the %K and %D lines react too quickly. They're just too sensitive, so you get a lot of fake signals - whipsaws - especially when prices hit overbought or oversold levels. It's easy to get tricked by these sudden moves.

Slow Stochastics Indicator Technical Indicator

Slow Stochastic uses smoothed price information from the original calculation and is favored by many traders. This version of the slow stochastic stock indicator is less likely to have sudden, erratic movements compared to the fast stochastic oscillator version.

Concerning the slow stochastic indicator for stocks, a three-period moving average MA is utilized to smooth the lines of the stochastic indicator. This moving average relates not to price action but to the data derived from the stochastic oscillator trading lines.

Full Stochastic Indicator

Full Stochastics Oscillator Technical Indicator - this stochastic oscillator indicator does not use a fixed moving average MA period, like the slow indices trading stochastic oscillator version above. Indices traders do not want to use a fixed setting to calculate the stochastic stock indicator.

That's why traders developed the full stochastic - it's more flexible than the earlier two versions of the stochastic oscillator.

The full stochastic lets stock traders pick periods for fast and slow lines. It fits indices trading needs.

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3 Types of Stochastic Indicators