The Stochastic asks a beautifully simple question: within its recent ups and downs, is price currently sitting near the top of its range, or near the bottom? It gives its answer on a 0-to-100 scale.
Down near 20, price is hugging the bottom of its recent range — potentially oversold and due a bounce. Up near 80, it is pressed against the top — potentially overbought and due a pullback. It reacts quickly, which makes it good at picking out short-term turning points before they are obvious.
It shines most in a sideways, range-bound market, where price keeps bouncing between a rough floor and a rough ceiling. In fact, our own study of years of history found the Stochastic to be the single most reliable indicator on certain coins.