How to Use STO to Trade Better: A Practical Guide for New Traders

VitaliksTwin · 2026-01-05T16:30:00+00:00

The Stochastic Oscillator (STO) is a momentum indicator that determines the closing price's position within the range over the last 14 days. It helps identify overbought or oversold conditions with values from 0 to 100, consisting of %K (the main value) and %D (the average of %K), which confirm signals.

VitaliksTwin

2026-01-05 16:30:00

Abstract generation in progress

Many traders are already familiar with the Stochastic Oscillator (STO). But if you ask, “How does this indicator work?” or “What is the difference between Fast Stochastic and Slow Stochastic?” there might still be some confusion. Today, we will delve into how useful this STO is and how to use it effectively for trading.

STO is a tool that indicates price position

The Stochastic Oscillator is a momentum indicator that helps identify where the current closing price is within the (highest-lowest) range over the past 14 days, with values ranging from 0 to 100.

This allows STO to quickly measure whether the price is overextended (Overbought) or oversold (Oversold). The movement of this indicator is quite clear:

In an uptrend: The closing price tends to stay near the high, causing STO to approach 100.
In a downtrend: The closing price tends to stay near the low, causing STO to approach 0.

Structure of the Stochastic Oscillator (%K and %D)

STO consists of 2 lines:

%K: The main value calculated from the position of the closing price
%D: The moving average of %K (usually 3 days) used to confirm signals

Calculation formula:

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