Indicators: DSL - stochastic
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DSL - stochastic:
The Stochastic Oscillator is a Momentum indicator comparing the closing price of a security to the range of its prices over a certain period of time. The sensitivity of the oscillator to market movements is reducible by adjusting that time period or by taking a moving average of the result.
The general theory serving as the foundation for this indicator is that in a market trending upward, prices will close near the high, and in a market trending downward, prices close near the low. Transaction signals are created when the %K crosses through a three-period moving average, which is called the %D.
The DSL (Discontinued Signal Line) version of Stochastic does not use a moving average in a classical way for signals, but is instead calculating the signal lines depending on the value(s) of the stochastic. Thus, we are having two things : a signal line and a sort of levels that can be used for overbought and oversold estimation.
Author: Mladen Rakic