R: Stochastic Oscillator / Stochastic Momentum Index

stoch {TTR} | R Documentation

## Stochastic Oscillator / Stochastic Momentum Index

### Description

The stochastic oscillator is a momentum indicator that relates the location of each day's close relative to the high/low range over the past `n` periods. Developed by George C. Lane in the late 1950s. The SMI relates the close to the midpoint of the high/low range. Developed by William Blau in 1993.

### Usage

    stoch(HLC, nFastK = 14, nFastD = 3, nSlowD = 3, maType, bounded = TRUE,
      smooth = 1, ...)

    SMI(HLC, n = 13, nFast = 2, nSlow = 25, nSig = 9, maType,
      bounded = TRUE, ...)

### Arguments

`HLC` | Object that is coercible to xts or matrix and contains High-Low-Close prices. If only a univariate series is given, it will be used. See details.
`nFastK` | Number of periods for fast %K (i.e. the number of past periods to use).
`nFastD` | Number of periods for fast %D (i.e. the number smoothing periods to apply to fast %K).
`nSlowD` | Number of periods for slow %D (i.e. the number smoothing periods to apply to fast %D).
`maType` | Either: A function or a string naming the function to be called. A list with the first component like (1) above, and additional parameters specified as named components. See Examples.
`bounded` | Logical, should current period's values be used in the calculation?
`smooth` | Number of internal smoothing periods to be applied before calculating FastK. See Details.
`n` | Number of periods to use.
`nFast` | Number of periods for initial smoothing.
`nSlow` | Number of periods for double smoothing.
`nSig` | Number of periods for signal line.
`...` | Other arguments to be passed to the `maType` function in case (1) above.

### Details

If a High-Low-Close series is provided, the indicator is calculated using the high/low values. If a vector is provided, the calculation only uses that series. This allows stochastics to be calculated for: (1) series that have no HLC definition (e.g. foreign exchange), and (2) stochastic indicators (e.g. stochastic RSI - see examples).

The `smooth` argument is the number of periods of internal smoothing to apply to the differences in the high-low-close range before calculating Fast K. Thanks to Stanley Neo for the suggestion.

### Value

A object of the same class as `HLC` or a matrix (if `try.xts` fails) containing the columns:

fastK

  Stochastic Fast %K

fastD

  Stochastic Fast %D

slowD

  Stochastic Slow %D

SMI

  Stochastic Momentum Index

signal

  Stochastic Momentum Index signal line

### Note

The calculation for William's %R is similar to that of stochastics' fast %K.

The value for fast %K will be 0.5 whenever the highest high and lowest low are the same over the last `n` periods.

The stochastic oscillator and SMI calculate relative value of the close versus the high/low range and the midpoint of the high/low range, respectively.

The stochastic oscillator and the stochastic momentum index are interpreted similarly. Readings below 20 (above 80) are considered oversold (overbought). However, readings below 20 (above 80) are not necessarily bearish (bullish). Lane believed some of the best sell (buy) signals occurred when the oscillator moved from overbought (oversold) back below 80 (above 20).

For the stochastic oscillator, buy (sell) signals can also be given when %K crosses above (below) %D. Crossover signals are quite frequent however, which may result in whipsaws.

### Author(s)

Joshua Ulrich

### References

The following site(s) were used to code/document these indicators:
Stochastic Oscillator:
http://www.fmlabs.com/reference/StochasticOscillator.htm
http://www.equis.com/Customer/Resources/TAAZ?c=3&p=106
http://linnsoft.com/tour/techind/stoc.htm
http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:stochastic_oscillator_fast_slow_and_full
SMI:
http://www.fmlabs.com/reference/default.htm?url=SMI.htm

### See Also

See `EMA`, `SMA`, etc. for moving average options; and note Warning section. See `WPR` to compare it's results to fast %K.

### Examples

    data(ttrc)
    stochOSC <- stoch(ttrc[,c("High","Low","Close")])
    stochWPR <- WPR(ttrc[,c("High","Low","Close")])

    plot(tail(stochOSC[,"fastK"], 100), type="l",
        main="Fast %K and Williams %R", ylab="",
        ylim=range(cbind(stochOSC, stochWPR), na.rm=TRUE) )
    lines(tail(stochWPR, 100), col="blue")
    lines(tail(1-stochWPR, 100), col="red", lty="dashed")

    stoch2MA <- stoch( ttrc[,c("High","Low","Close")],
        maType=list(list(SMA), list(EMA, wilder=TRUE), list(SMA)) )

    SMI3MA <- SMI(ttrc[,c("High","Low","Close")],
        maType=list(list(SMA), list(EMA, wilder=TRUE), list(SMA)) )

    stochRSI <- stoch( RSI(ttrc[,"Close"]) )

[Package TTR version 0.23-1 Index]