Charting The Market  |  APR 2004

Charting The Market: Stochastics by David Penn

Stocks & Commodities V. 22:4 (120-121): Charting The Market: Stochastics by David Penn STOCHASTICS For many technicians, stochastics are the first real oscillator to be encountered when embarking on the study of technical analysis. Unlike some of the more common-sounding concepts in technical analysis, terms like support and resistance, breakout and breakdown, trading range, relative strength, and pullback, a term like stochastics lets an acolyte technician know he or she has truly entered a different field of knowledge with its own rules, customs, mores, and in-group jargon. What are stochastics? George Lane, in an informative and entertaining article for Technical Analysis of STOCKS & COMMODITIES back in 1984, wrote a brief primer on using what he called “Lane’s Stochastics”: ""This method is based on the observation that as price decreases, the daily closes tend to accumulate ever closer to their extreme lows of the daily range. Conversely, as price increases, the daily closes tend to accumulate ever closer to the extreme high of the daily range.

by David Penn