# Stochastic oscillator explained: %K, %D and how to read it

> The stochastic oscillator compares a close with the recent high-low range. Here is how %K and %D are calculated, the usual settings and the main ways traders read it.

- Canonical URL: https://forextradingcommunity.com/news/stochastic-oscillator-explained/
- Type: Guide
- Published: 2026-11-03
- Updated: 2026-11-03
- Publisher: Forex Trading Community (https://forextradingcommunity.com), FTC Editorial Team

The stochastic oscillator is a momentum indicator. It compares the latest close with the range of prices over a set number of periods, and it runs from 0 to 100. A reading near the top means the close sits close to the recent high. A reading near the bottom means it sits close to the recent low.

## How it is calculated

With the common settings of 14, 3 and 3:

- **%K** = (current close − lowest low over 14 periods) ÷ (highest high over 14 periods − lowest low over 14 periods) × 100
- **%D** = a 3-period moving average of %K

Many platforms default to a slow version, which smooths %K with a 3-period average before %D is drawn. Check which version your platform shows, because the two produce different readings.

## How traders read it

- **Overbought and oversold zones.** Readings above 80 and below 20 are the conventional thresholds. They mark where a move has stretched, not where it must reverse. In a strong trend the oscillator can stay in one zone for a long time.
- **Crossovers.** %K crossing above %D is read as bullish momentum, and crossing below as bearish. These crossovers are frequent, so many traders only act on them near a level they already watch.
- **Divergence.** When price makes a new high but the oscillator does not, the momentum behind the move may be weakening. As with [MACD divergence](/news/macd-indicator-explained/), it is a warning rather than a timing signal.

## Limits

The indicator is bounded and built from past prices, so it lags. It can whipsaw in a range and give early signals in a strong trend. [RSI](/news/rsi-indicator-explained/) measures a different ratio, so comparing the two can add information, but stacking several similar oscillators mostly repeats the same reading.

## Common questions

### What are the default stochastic settings?

Commonly 14, 3 and 3: a 14-period lookback, a 3-period smoothing in the slow version, and a 3-period average for %D.

### What do readings above 80 and below 20 mean?

They are conventional overbought and oversold zones. They show that price is near the top or bottom of its recent range, not that a reversal must follow.

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This article is for information only and is not financial advice. Trading forex and CFDs carries a high risk of losing money.