Measures where the close sits relative to the recent high-low range — and like its cousin RSI, it can stay pinned above 80 for weeks in a genuinely strong trend.
George Lane popularized comparing today's close to the recent high-low range, on the idea that momentum shifts before price does.
Like MACD, it pairs a faster %K line against a smoothed %D line, with crossovers watched the same way.
80/20 thresholds became shorthand for overbought/oversold, inheriting the exact same persistence problem RSI has.
Traders today treat it as faster and choppier than RSI, useful in ranges but needing the same trend-context discipline.
%K measures the close's position between the recent high and low, scaled 0-100; %D is a smoothed average of %K.
In a genuinely strong trend, closes keep landing near the top of the recent range, pinning the oscillator high — exactly the same persistence problem as RSI.
A %K/%D crossover, especially near the extreme bands, is a genuine signal — but the oscillator's own speed means it crosses far more often than MACD, demanding the same context discipline.
Through that stretch, the oscillator stayed pinned above 80 repeatedly, while price kept climbing well past where a threshold-seller would have exited.
Around that top, %K crossed below %D right near the 80 line — a genuine, well-placed bearish crossover that preceded the decline.
Price is in a strong, sustained uptrend. Stochastic reads above 90 for the tenth straight day. A trader shorts immediately. Sound?
%K crosses below %D while both sit around 50, in the middle of the range, with no clear trend either way. Is this a strong signal?
Price makes a new high, but the stochastic reading makes a clearly lower high than its prior peak. What does this combination suggest?
%K and %D, watched tick by tick on the left — and the mark it leaves in the ledger on the right. A well-placed crossover near the extreme, a mirrored bullish case — and a naive midrange cross that led nowhere.
%K crosses %D. Judge whether it happens near an extreme — then call it: a real signal, or midrange noise.
The classic error is treating this faster oscillator as needing less discipline, when it actually needs more. The discipline is mechanical: check the trend before any level reading, then only weight crossovers happening near the 80/20 extremes.
Lane asked where price closed within its range instead of how much it moved — a genuinely different lens, landing on the exact same lesson as RSI: read the trend, and let divergence do the real talking.
History doesn't repeat itself, but it often rhymes.