As the title suggests when i remove the %D line i get clearer view of what the indicator does and gain less ambiguity. is it ok to switch that line off? because I don’t see much use for the %D line.
If I’m not wrong %K is the actual value of the stochastic, and %D is an average of last 3-5 values of %K
Stochastic just compares closing price of a candle, to the the max and min value of the last X sessions or candles.
So when closing price is near the max value, %K will be near 1 and if it’s close to the low, it will be near 0
So if there is a strong uptrend, and resistance has been broken or heavily tested, K and D, both will be near 1.
However if the market is ranging, but today’s session/current candle is on the top of the box, K will be near 1, but D will be 0,5 or something like that.
Also %K=0 means it’s pushing down or trying to break support.
So I guess %D is there to tell you how strongly the market has been behaving. Or if the market is trying hardly to push above support/resistance or it’s been pulling back.
All this said, in theory, this indicator has been used as an overbought/oversold indicator, but in practice, trends can be long, no matter what the indicators says. So careful on using this as a signal by itself.
I would say when K is near N (and about 0,5), we will be in a pullback, so maybe a good time to look for trend continuation and hop on. I personally prefer to look at the price action.
Yes because the %K line can at times be choppy and inconsistent with volatile instruments. The x-period SMA smoothing of the %D, though giving it a lag, smooths the jaggedness giving it a more consistent reading.
For e.g. the chart below smooths out the brief break >80 and reads a peak 79.80 where marked. There’s a second good example at the end of the same chart (05JUL21 04:00) where the PA almost dips below <80 but the %K smooths the action to read one curve.
