Stochastic Oscillator

The StochasticOscillator is a momentum indicator that compares a security’s closing price to its price range over a specific time period. This indicator is shown as two lines on a chart:

• %K, which is the main line representing the level of the Stochastic Oscillator.
• %D, which is a moving average of %K and typically displayed as a dotted line.

Market Signals

The Stochastic Oscillator provides signals for buying and selling:

• Buy Signal: When either %K or %D falls below a certain threshold (e.g., 20) and then climbs back above it.
• Sell Signal: When the Oscillator rises above a higher threshold (e.g., 80) and then drops below it.

These levels indicate overbought or oversold conditions and suggest potential price reversals.

Calculation

The calculation of the Stochastic Oscillator involves several steps:

RawK = 100 * (Close - Lowest(Low, RawPeriod)) / (Highest(High, RawPeriod) - Lowest(Low, RawPeriod))
%K = SMA(RawK, KPeriod)
%D = SMA(%K, DPeriod)

• RawK calculates the raw Stochastic value.
• %K smooths this value using a Simple Moving Average (SMA) over KPeriod.
• %D then takes an SMA of %K over DPeriod to provide a signal line.

    import { Bar, InstrumentProcessorBase } from '@botmain/common';
    import { StochasticOscillator } from '@botmain/indicators';

    export class InstrumentProcessor extends InstrumentProcessorBase {
        stochastic = new StochasticOscillator(28, 4, 4);

        ...

        onBarClose(bar: Bar) {
            //Add bar to calculate new stochastic value
            this.stochastic.addBar(bar);

            ...

            //Get indicator values
            const percentK = this.stochastic.percentK;
            const percentD = this.stochastic.percentD;
            
            // Get previous values
            if(this.stochastic.historyCount >= 2) {
                const percentK = this.stochastic.values[1].percentK;
                const percentD = this.stochastic.values[1].percentD;
            }
        }
    }