Close within the range
%K = 100 × (close − period low)/(period high − period low). Equal high and low make the ratio undefined, not a zero reading. %D smooths %K; fast and slow variants apply different smoothing.
Zones and crosses
20 and 80 are conventional reference levels, not boundaries that force price to reverse. A strong trend can keep the indicator near an extreme. A line crossover needs context and a specified, testable rule.
Avoid duplicated evidence
RSI, stochastic and moving averages may respond to the same prices. Three indicators derived from one source are not three independent pieces of evidence. Check structure, volatility and events, then define invalidation.
Illustrative example
High 10, low 5 and close 8 give %K=60. A three-value SMA of %K readings 50, 60 and 70 gives %D=60. These are illustrative numbers, not a real-market signal.
Review checklist
- Identify period and indicator variant.
- Use completed candles and a valid range.
- Interpret extremes within trend context.
- Validate rules before applying them.