Description
The Double Smoothed Stochastic study is a momentum-based oscillator that includes double EMA smoothing in the calculation of the Stochastic indicator. Akin to the latter, the Double Smoothed Stochastic is calculated as a percentage ratio, however the components of that ratio are slightly different:
- The nominator is equal to the difference of the current close and the lookback period's low consequently smoothed by two EMAs;
- The denominator is equal to the lookback period's high-low range consequently smoothed by the same EMAs.
The Double Smoothed Stochastic oscillator can be used as an overbought-oversold indicator: indicator values higher than 70 may indicate overbought conditions, while those below 30 tend to indicate oversold conditions. Looking for divergences of the indicator from the price plot may also prove useful.
Input Parameters
| Parameter | Description |
|---|---|
r length
|
The period of the second EMA. |
s length
|
The period of the first EMA. |
length
|
The lookback period on which the high and the low prices are to be found. |
Plots
| Plot | Description |
|---|---|
DSS
|
The Double Smoothed Stochastic plot. |
Example*
*For illustrative purposes only. Not a recommendation of a specific security or investment strategy.