Summary
Stochastics compares a recent closing price with the price range observed over a selected period.
Parameters
K Period sets the lookback range, K Smoothing smooths the raw %K line, and D Period smooths %K into the signal line. The defaults are 14, 3, and 3. Longer settings generally reduce noise and delay changes.
How to read it
Use the oscillator and its smoothed line to describe where the recent close sits within the recent range. Interpret it with the trend and price action rather than as an automatic buy or sell signal.
Things to keep in mind
Stochastics can remain at high or low readings during sustained trends, and its behaviour changes with the selected periods and smoothing settings.