The Super Stochastic Trading Strategy

Creating & Evaluating the Super Stochastic Exit Strategy

Sofien Kaabar, CFA


Without a doubt the stochastic oscillator is a universally used indicator. It uses such a simple yet powerful formula in order to detect rapid oversold and overbought conditions. This article discusses a certain strategy based on this indicator.

The Stochastic Oscillator

The Stochastic Oscillator is a technical indicator widely used in financial analysis, especially in the field of technical analysis for trading stocks, forex, and other financial instruments. It helps traders and analysts identify potential overbought and oversold conditions in a market, which can assist in making decisions about buying or selling assets.

The Stochastic Oscillator consists of two lines, typically referred to as %K and %D:

  • %K Line: This is the main line of the oscillator and represents the current closing price relative to the trading range over a specified period. The formula for calculating %K is:

%K = (Current Close — Lowest Low) / (Highest High — Lowest Low) * 100

Here, the “Current Close” is the most recent closing price, “Lowest Low” is the lowest price over the specified period, and “Highest High” is the highest price over the…