KD : Stochastic Oscillator indicator

The word "stochastic" is not actually the random, but it represent the price or the band oscillate between high-low range.

This indicator include two value, K and D, the indicator is mainly used to judge the price is relatively high or low in past time.

KD indicator caculation and formula:

RSV= (closedPrice(today) – the lowest price in n days) ÷ (the highest price in n days – the lowest price in n days) × 100

K value(today)= K value(yesterday) × (2/3 ) +RSV value(today) × ( 1/3)

D value(today)= D value(yestertay) × (2/3) +K value(today) × ( 1/3)

※the value n is usually used to be 9 days or 14days.

Simply using condition

(1)Overbuying :

KD value > 80, means that the price is relative strong, high probability to get bullish.

(2)Overselling:

KD value < 20, means that the price is relative weak, high probability to get bearish.

(3)Golden cross:

When K value cross the D value from low to high, means that in the short term the price may be bullish.

(4)Death cross:

When K value cross the D value from high to low, means that in the short term the price may be bearish.

Some warning

sometimes the KD indicator may cross frequently in the short time, and the price doesn't have dramatically wave, some investor may confuse with this condition, and the others may think it as a very bullish or very bearish trend.

thanks for reading.