SKE-Labs Stochastic Oscillator Trading
Stochastic measures momentum by comparing closing price to the price range over a period.
Components
| Line | Description | Use |
|---|---|---|
| %K | Main line (fast) | Primary signal |
| %D | Signal line (3-SMA of %K) | Confirmation |
Signals
Overbought/Oversold Reversals
- Define low/high bands from training data or use 20/80 only as conventional seeds; a cross creates a candidate trigger, not an automatic trade
%K/%D Crossover
- %K crosses above %D → bullish feature; test interaction with oscillator zone
- %K crosses below %D → bearish
Divergence
- Price new high + Stochastic lower high → bearish
- Price new low + Stochastic higher low → bullish
Momentum
- %K above 50 and rising → bullish momentum
- %K below 50 and falling → bearish momentum
Market-Specific Strategies
Ranging Markets
- Apply calibrated low/high exit-cross rules
- Target: opposite zone
Trending Markets
- Define trend objectively and test trend-direction filters; persistent extremes are possible
Workflow
Get Stochastic:
get_indicators(indicator_code="stoch", symbol=<symbol>, exchange=<exchange>, interval=<interval>)Determine market type (trending vs ranging) to select strategy
Check for %K/%D cross in OB/OS zone
Confirm with candle data:
get_candles_around_date(symbol=<symbol>, exchange=<exchange>, interval=<interval>, date=<date>)Enter with confirmation candle; stop beyond recent swing
Evidence and Validation
- Treat the setup as a testable hypothesis, not a prediction. Define thresholds, entry, invalidation, and exit before evaluating outcomes.
- Calibrate on the same instrument, venue, session, and timeframe. Use closed candles and a held-out or walk-forward sample; record every variant tried.
- Include spread, fees, slippage, borrow or funding, partial fills, and latency. Reject the setup when net expectancy is not positive or depends on one narrow parameter.
- Return observed inputs, missing data, cost assumptions, entry, invalidation, exit, and a valid, watch, or no-trade status.
- Research basis: The technical-rule evidence finds stochastic-rule performance differs across markets and is not reliably positive after transaction costs.
Key Rules
- Never trade from an extreme label alone; require the predeclared closed-bar rule.
- Calibrate divergence pivots, spacing, and oscillator bands.
- Test with/against-trend variants rather than assuming the filter adds edge.
- Treat 14/3/3 as a conventional baseline; record all parameter variants and turnover.
Related Skills
- rsi-divergence — Stochastic divergence + RSI divergence together strengthens reversal signals
- bollinger-bands — test stochastic state at volatility-envelope extremes as a combined feature