K line and D line are used to measure stochastics. Stochastics is one of the most popular technical indicators because it’s easy to understand and is very accurate in determining when you should buy or sell an asset. Stochastic lines below 20 signal that the market is possibly oversold. Stochastics lines above 80 signal that the market is overbought. That means that, during a downtrend, the prices tend to close near the lower end of the range. This indicator follows the assumption that during the uptrends the closing prices move towards the higher end of the range. Stochastic Oscillators analyze the high range, low range and last closing price of an asset for a predefined period and we use them for recognizing when the asset goes into the overbought or oversold positions. Stochastic Oscillator is one of the leading indicators because of its ability to anticipate trend reversals and it can be represented with a value between 0 and 100 within which range it oscillates. The assumption is that momentum changes precede price changes so it’s based on analysis of the velocity of price changes. It’s a momentum indicator, used as a tool to predict the performance of an asset. Lane created the Stochastic Oscillator in the 1950s.
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