 Type: momentum oscillator
 Data requirement: daily closes for individual stock
 Inputs
 no. of periods (n) to use (suggested default is 14)
 previous average gain
 previous average loss
 current gain
 current loss
 Formulas
 Gain = close(k) – close(k1), when close(k) is higher than close(k1), where k is the trading day for calculation
 Loss = close(k1) – close(k), when close(k) is lower than close(k1), where k is the trading day for calculation
 Initial
 First Average Gain = Sum of Gains over the past n periods / n
 First Average Loss = Sum of Losses over the past n periods / n
 Subsequent

Average Gain = [(Previous Average Gain) x (n1) + Current Gain] / n
 Average Loss = [(Previous Average Loss) x (n1) + Current Gain] / n

 RS = Average Gain / Average Loss
 RSI = 100 – 100 / (1 + RS)
 Signals
 Oversold: below 30
 Overbought: above 70
 Divergences
 Failure swings
 Centerline crossovers
 General trend
 c.f. http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:relative_strength_in
momentum
Stock Technical Analysis – Stochastic Oscillator
Finance and Economy, Technical Type: momentum oscillator
 Data requirement: daily highlowcloses for individual stock
 Inputs
 look back period: no. of periods (n) to use (suggested default is 14)
 smoothing period: no. of periods (m) for smoothing %K (suggested default is 3)
 moving average period: no. of periods (l) for SMA (suggested default is 3)
 Formulas
 Fast Stochastic (n=14, m=1, l=3)
 Fast %K = (Current Close – Lowest Low in past n periods) / (Highest High in past n periods – Lowest Low in past n periods) * 100
 Fast %D = 3day SMA for Fast %K
 Slow Stochastic (n=14, m=3, l=3)
 Slow %K = 3day smoothed Fast %K
 Slow %D = 3day SMA for Slow %K
 Full Stochastic (n, m, l being arbitrary)
 Full %K = mday smoothed Fast %K
 Full %D = lday SMA for Full %D
 Fast Stochastic (n=14, m=1, l=3)
 Signals
 Oversold: below 20
 It is often to observe frequent oversold readings in bearish trend. So look for occasional overbought readings in such a bearish trend instead.
 Overbought: above 80
 It is often to observe frequent overbought readings in bullish trend. So look for occasional oversold readings in such a bullish trend instead.
 Reversal: stay in oversold / overbought zone and then leave the zone.
 Divergences are not confirmation signals. Could be confirmed by support / resistance breaks.
 3step confirmation pattern
 signal lines crossover (%K crossing %D) or zone crossover (moving above 20 from oversold zone or moving below 80 from overbought zone)
 centerline (50) crossover
 resistance / support break in price chart
 Oversold: below 20
 c.f. http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:stochastic_oscillato