Stochastic

The Stochastic Oscillator is a popular oscillator that evaluates the current closing price relative to the price range for a selected period. It shows the speed and direction of price change, helps identify overbought/oversold zones, and signals reversals.

The indicator consists of two lines:

• %K (Fast Line) — the current price position relative to the range for the selected period.
• %D (Slow Line) — a Moving Average of %K, which smooths out fluctuations.

The Veles platform offers two types of stochastics: fast and slow.

Fast Stochastic

• Uses 5 periods to calculate %K.
• Very sensitive to price changes.
• Provides more signals, but also more “noise”.

Slow Stochastic

• Calculates %K based on 14 periods.
• Additionally smooths out fluctuations using a Moving Average.
• Less prone to false signals and suitable for longer-term trading.

Stochastic Filters in Veles

Two filter types are available for each stochastic:

1. Line Crossover

• K crosses D from top to bottom → Sell-signal (open Short or close Long).
• K crosses D from bottom to top → Buy-signal (open Long or close Short).

2. Overbought and Oversold Levels

• Both lines crossing level 20 from bottom to top → Buy signal (open Long or close Short).
• Both lines crossing level 80 from top to bottom → Sell signal (open Short or close Long).

How to use Stochastic

1. Trend entry — use K and D crossover signals in the direction of the main trend.
2. Signal filtering — combine Stochastic with other indicators (RSI, MACD, SMA, EMA).
3. Timeframe selection — on shorter timeframes, Stochastic generates many signals, while on higher timeframes signals are more reliable.

Limitations

• Stochastic often gives false signals during periods of low volatility.
• Can hang in overbought or oversold zones for a long time.
• Works best in sideways movements and when trading from support/resistance levels.

⚠ Before using the indicator, we recommend backtesting its settings to ensure the strategy suits your trading style.

Using in Veles Bots (Flexible Indicator)

Two variants are available: Stochastic (%K) and Stochastic (%D).

Available settings:

• Period - the number of candles for %K calculation. Range: 3–100, default 14.
• SmoothK - the smoothing period for the %K line. Range: 1–50, default 1.
• SmoothD - the smoothing period for the %D line (available for %D variant only). Range: 1–50, default 3.
• Interval - the candle timeframe.
• Method - the calculation type. By bar close (only on the selected interval) or by minute (once per minute for any interval).
• Shift - shifts the requested indicator value back by the specified number of candles.

Summary

The Stochastic Oscillator is a proven tool for identifying momentum shifts and overbought/oversold extremes. In Veles bots, both the Fast and Slow variants are available — Fast for more frequent signals on lower timeframes, Slow for more reliable signals on higher ones. Combine with trend filters to reduce false entries during strong directional moves.