Article/Author: Omega Research Inc., 1997

Download: STOCH-CLASSIC.ELA

Category: Indicator > Oscillators

Description:

The Stochastic Classic indicator calculates the location of a current price in relation to its range over a period of bars. The default settings are to use the most recent 3 bars (input KAdjust), the high and low of that period to establish a range and the close as the current price.
This calculation is then indexed and averaged for the most recent 5 bars, specified in the input Length. This value is plotted as %K. The value %D is a 5 bar average of a smoothed %K. %K and %D plot as oscillators with values from 0 to 100.

Usage:

The direction of the Stochastics should confirm price movement. For example, rising Stochastics confirm rising prices.

Stochastics can also help identify turning points when there are non-confirmations or divergences. For example, a new high in price without a new high in Stochastics may indicate a false breakout. Stochastics are also used to identify overbought and oversold conditions when the Stochastics reach extreme highs or lows. Additionally, %K crossing above the smoother %D can be a buy signal and vice versa.

INPUT: LENGTH(5), KADJUST(3),  DADJUST(3), OVERBOUGHT(80), OVERSOLD(20);

VARIABLES: KADJUSTED(0), DADJUSTED(0);



KADJUSTED = SLOWKCLASSIC(KADJUST, LENGTH);

DADJUSTED = SLOWDCLASSIC(DADJUST, LENGTH);



IF CURRENTBAR > LENGTH THEN BEGIN

	PLOT1(KADJUSTED, "%K");

	PLOT2(DADJUSTED, "%D");

END;

PLOT3(OVERBOUGHT, "OVERBOUGHT");

PLOT4(OVERSOLD, "OVERSOLD");



{ALERT CRITERIA}

IF PLOT1 > OVERBOUGHT THEN

	ALERT("THE %K LINE IS IN OVERBOUGHT TERRITORY")

ELSE

	IF PLOT1 < OVERSOLD THEN

		ALERT("THE %K LINE IS IN OVERSOLD TERRITORY");