The stochastic oscillator asks one question: where did today's close fall inside the high-to-low range of the last N days (classically 14)? Close near the top of the range and it reads near 100; near the bottom, near 0. The fast line is %K; a short average of it is the slower %D. Like RSI it's a range-bound momentum gauge.
How it's read
Above 80 is loosely called overbought, below 20 oversold, and a %K/%D cross is watched as a turn. The intuition is that closing repeatedly near the top of the range shows strength — until it doesn't. In a strong trend it can pin at an extreme for a long time, so the reading is a description of recent behaviour, not a prediction.
What it's worth
It's a cousin of RSI, tapping the same short-term reversion tendency our Short-Term Mean Reversion strategy captures with a plain, testable rule. The general warning holds: oscillator thresholds are easy to fit in hindsight and often fade under realistic costs — always judge a rule by its its backtest, not its chart.
Educational material — not investment advice.