Vyreon LabsMarket Measurements

Learn the measurements

Stochastic Oscillator and Stochastic RSI: Formula and 80/20 Levels

Slow stochastic (14,3,3) %K and %D and Stochastic RSI (14,14,3,3): the formulas, the 80/20 conventions and what they measure.

Reviewed · Sources at the end · How Vyreon measures
Vyreon's per-security reports are not live yet; this page describes what they will measure. Examples are illustrative.

The stochastic oscillator shows where the latest close sits within the high–low range of the last 14 sessions, on a scale of 0 to 100. A reading of 100 means the close was at the top of that range and 0 at the bottom. Vyreon reports the slow stochastic (14, 3, 3) and the Stochastic RSI, which applies the same idea to RSI instead of price.

Stochastic Oscillator Formula

  1. Raw %K = 100 × (close − lowest low of 14 sessions) ÷ (highest high of 14 sessions − lowest low of 14 sessions)
  2. Slow %K = 3-session simple average of raw %K
  3. %D = 3-session simple average of slow %K

The three numbers in "(14, 3, 3)" are the lookback and the two smoothing windows. The unsmoothed raw %K is the "fast" stochastic; Williams %R is the same quantity on a −100 to 0 scale.

Illustrative example: if the 14-session high is 110, the low is 100 and the close is 108, raw %K is 100 × 8 ÷ 10 = 80.

How To Read %K And %D: The 80/20 Convention

By convention, readings above 80 are called overbought and below 20 oversold. They mean the close has been near the top or bottom of its recent range, nothing more. In a steady trend the stochastic can stay above 80 or below 20 for a long time. %K crossing %D is another convention; it shows the shorter average turning relative to the longer one.

What Is Stochastic RSI?

Stochastic RSI measures where today's RSI sits within its own range over the last 14 sessions:

  1. Raw StochRSI = 100 × (RSI − lowest RSI of 14 sessions) ÷ (highest RSI of 14 sessions − lowest RSI of 14 sessions), using Wilder RSI(14)
  2. %K = 3-session average of raw StochRSI
  3. %D = 3-session average of %K

That is the (14, 14, 3, 3) setting. Some platforms show it from 0 to 1; Vyreon uses 0 to 100. Because it measures RSI's position within its own range, the raw value reaches 0 or 100 whenever RSI sits at its own 14-session low or high, so it swings between extremes far more readily than RSI does. If RSI has not changed at all over the 14 sessions, the raw value is set to 50.

How Vyreon Calculates It

  • Highs, lows and closes from daily bars adjusted for splits and dividends, so a split does not register as a collapse to the bottom of the range.
  • Slow stochastic (14, 3, 3): slow %K and %D.
  • Stochastic RSI (14, 14, 3, 3): %K and %D.
  • The 14-session window includes the reported day; no later session is used.

What The Stochastic Oscillator Does Not Tell You

  • It describes the position of recent closes within a recent range. It does not forecast.
  • 80 and 20, and %K/%D crossings, are conventions, not rules.
  • The range resets as old sessions leave the window, so the reading can jump when a big day drops out.

Related: RSI · Williams %R · CCI · MACD · price channels

Sources

  • George C. Lane, credited with developing the stochastic oscillator and its %K and %D lines.
  • Tushar Chande and Stanley Kroll, The New Technical Trader (1994): introduced the Stochastic RSI.
  • John J. Murphy, Technical Analysis of the Financial Markets (New York Institute of Finance, 1999): stochastics and their conventional readings.

The 80 and 20 levels and %K/%D crossings are trading conventions; we know of no peer-reviewed source establishing them.