The Stochastic Oscillator is a momentum indicator that shows the location of the close relative to the high-low range over a set number of periods. It doesn't follow price or volume, but follows the momentum of price. The momentum changes direction before the price. It is useful in identifying overbought and oversold levels. More details from StockCharts.com.
In my technical analysis, I use the Slow Stochastic with %K=8 and %D=3, together with other indicators like RSI. I use it to identify a break above 20 (upturn signal) and below 80 (downturn signal). A popular %K (aka look-back period) is 14, but I prefer a shorter look-back of 8 which I find gives an earlier indication.
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