Stochastic %D (5, 3, 0, 3, 0)

The Stochastic %D (5, 3, 0, 3, 0) is a momentum oscillators indicator used in Skyrexio Strategy Builder for momentum analysis and overbought/oversold identification.

Introduction

The Stochastic %D (5, 3, 0, 3, 0) is a smoothed momentum oscillator that provides neutral directional bias for both LONG and SHORT opportunities. As a 3-period moving average of %K, it reduces noise and provides more reliable signals while maintaining sensitivity to overbought/oversold conditions.

How Stochastic %D Works

The Stochastic %D is a smoothed version of %K, calculated as a 3-period moving average of %K values. This smoothing reduces noise and provides more reliable signals. %D is often called the 'slow stochastic' and is used as a signal line.

β€’ Signal confirmation - %D crossovers with %K provide trading signals β€’ Trend smoothing - %D filters out short-term noise in %K β€’ Overbought/Oversold confirmation - %D in extreme zones confirms %K signals β€’ Momentum direction - Rising %D indicates bullish momentum, falling %D indicates bearish momentum β€’ Reliability enhancement - Smoothing reduces false signals common in volatile markets

Smoothed Momentum Psychology: Stochastic %D provides a smoothed view of momentum by averaging %K values. This reduces whipsaws and false signals while maintaining sensitivity to genuine momentum shifts. %D crossovers with %K are among the most reliable stochastic signals, combining the sensitivity of %K with the reliability of smoothed %D.

Key Characteristics

Attribute
Details

Category

Momentum Oscillators

Type

Smoothed Momentum Signal

Primary Use

Signal confirmation and noise reduction

Timeframe

All timeframes supported (1m to 1M)

Confirmation

%K crossovers, volume, trend context

Strategy Applications

🟒 LONG STRATEGY (Smoothed Oversold Recovery)

Base Entry Order (LONG)

Trigger Type: Once per bar close
Bar TF: 1H
First Condition: Stochastic %K (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Cross Above
Second Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H

Additional Entry Orders (LONG)

Additional Entry 1: Oversold crossover confirmation
First Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 30

AND

First Condition: Stochastic %K (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Greater Than
Second Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H

OR

Additional Entry 2: Smoothed momentum acceleration
First Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Greater Than
Second Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H
Offset: 1

AND

First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

Take Profit Orders (LONG)

Rule 1: Exit condition - Overbought crossover reversal
First Condition: Stochastic %K (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Cross Below
Second Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H

AND

First Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 70

OR

Rule 2: Exit condition - Smoothed momentum peak
First Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 80

OR

Rule 3: Exit condition - Volume divergence at highs
First Condition: Volume
Timeframe: 1H
Operator: Less Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

AND

First Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 75

Stop Loss Orders (LONG)

Rule 1: Stop loss - Bearish crossover confirmed
First Condition: Stochastic %K (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Cross Below
Second Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H

OR

Rule 2: Stop loss - Smoothed momentum breakdown
First Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 15

AND

First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

OR

Rule 3: Stop loss - Trend breakdown confirmation
First Condition: Close Price
Timeframe: 1H
Operator: Cross Below
Second Condition: Exponential Moving Average (50)
Timeframe: 1H

πŸ”΄ SHORT STRATEGY (Smoothed Overbought Reversal)

Base Entry Order (SHORT)

Trigger Type: Once per bar close
Bar TF: 1H
First Condition: Stochastic %K (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Cross Below
Second Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H

Additional Entry Orders (SHORT)

Additional Entry 1: Overbought crossover confirmation
First Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 70

AND

First Condition: Stochastic %K (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Less Than
Second Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H

OR

Additional Entry 2: Smoothed momentum deceleration
First Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Less Than
Second Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H
Offset: 1

AND

First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

Take Profit Orders (SHORT)

Rule 1: Exit condition - Oversold crossover reversal
First Condition: Stochastic %K (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Cross Above
Second Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H

AND

First Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 30

OR

Rule 2: Exit condition - Smoothed momentum trough
First Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 20

OR

Rule 3: Exit condition - Volume divergence at lows
First Condition: Volume
Timeframe: 1H
Operator: Less Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

AND

First Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 25

Stop Loss Orders (SHORT)

Rule 1: Stop loss - Bullish crossover confirmed
First Condition: Stochastic %K (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Cross Above
Second Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H

OR

Rule 2: Stop loss - Smoothed momentum breakout
First Condition: Stochastic %D (5, 3, 0, 3, 0)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 85

AND

First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

OR

Rule 3: Stop loss - Trend reversal confirmation
First Condition: Close Price
Timeframe: 1H
Operator: Cross Above
Second Condition: Exponential Moving Average (50)
Timeframe: 1H

Advanced Strategy Combinations

Smoothed Stochastic Divergence Strategy

Divergence with Smoothing:

  • Price: Makes new high/low

  • Stochastic %D: Smoothed momentum fails to confirm

  • Crossover: %K crosses %D in opposite direction

  • Volume: Declining participation confirms divergence

Double Stochastic Strategy

Setup Process:

  1. Both %K and %D reach extreme levels (>80 or <20)

  2. %K crosses %D in reversal direction

  3. %D begins to turn in reversal direction

  4. Volume supports the momentum shift

Execution:

  • Base Order: %K/%D crossover at extreme levels

  • Additional: %D momentum acceleration confirmation

  • Take Profit: Opposite extreme levels with crossover

  • Stop Loss: %D momentum breakdown with volume

Multi-Timeframe Smoothed Analysis

Setup Process:

  1. Daily %D shows major smoothed momentum direction

  2. 4H %D confirms crossover alignment

  3. 1H %K/%D crossover provides precise entry

  4. Volume expansion supports momentum shift

Execution:

  • Base Order: 1H %K/%D crossover aligned with higher timeframes

  • Additional: Multi-timeframe %D momentum confirmation

  • Take Profit: Higher timeframe %D reversal signals

  • Stop Loss: Multi-timeframe momentum breakdown

Risk Management Guidelines

Position Sizing

Strategy Type
Position Size
Conditions

LONG Strategy

Standard

%K crosses above %D in oversold

SHORT Strategy

Standard

%K crosses below %D in overbought

Smoothed Divergence

Increased

Clear %D divergence confirmation

Extreme Levels

Reduced (75%)

%D at very extreme levels (>90/<10)

Stochastic %D Reliability Factors

βœ… Clear %K/%D crossovers at extreme levels βœ… %D momentum acceleration/deceleration βœ… Volume expansion supports crossover βœ… Multi-timeframe %D alignment βœ… Smoothed divergence patterns

Best Practices

For LONG Strategies

For SHORT Strategies

Common Mistakes to Avoid

Market Conditions Analysis

Market Type
LONG Strategy Effectiveness
SHORT Strategy Effectiveness

Uptrend

🟒 High (smoothed oversold bounces)

πŸ”΄ Low (against trend)

Downtrend

πŸ”΄ Low (against trend)

🟒 High (smoothed overbought reversals)

Ranging

🟒 High (reliable crossovers)

🟒 High (reliable crossovers)

High Volatility

🟑 Medium (smoothing helps)

🟑 Medium (smoothing helps)

Low Volume

πŸ”΄ Low (wait for confirmation)

πŸ”΄ Low (wait for confirmation)

Indicator
Relationship
Link

Stochastic %K

Fast signal line

RSI

Momentum confirmation

Williams %R

Similar oscillator

Volume

Crossover confirmation

Conclusion

Stochastic %D provides smoothed momentum signals that reduce noise while maintaining sensitivity to genuine momentum shifts. Success depends on proper crossover timing, extreme level identification, and volume confirmation.

Key Takeaways

Success with Stochastic %D requires understanding its role as a smoothed confirmation tool. The key is waiting for %K/%D crossovers at extreme levels (>70 or <30) and confirming with volume and trend context before entering positions.


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