Stochastics can be either fast or slow. This speed does not relate to the quantity of time periods that it covers, but how swiftly it’ll respond to a change in direction from bullish to bearish or vice versa. The fast stochastic is more respondent, like a fast car. This is the mathematical formula for fast stochastics:

%K = 100((C – L14)/(H14 – L14))

C = last final price, L14 = lowest low in the past 14 periods, H14 = highest high during last fourteen periods. Stochastic based trading systems usually take a signal from the crossover of the two lines %K and %D.

The fast stochastic was the 1st and remains the main stochastic indicator utilized by traders. However, some traders find it replies to changes in price movements too swiftly, leading to a premature signal. Therefore slow stochastics were developed. The new %D is then a three period moving average of the new slow %K. Clearly this is going to reduce sensitiveness to minor variations in cost. The slow indicator is so the one that is most frequently utilized by day traders. It can be extremely effective, so check it out in your charts or look for a technical charting service that provides it.