1. Evaluation of a Stochastic Oscillator Equity Trading Method
27 February 2003
CamShaft Investors
Ashvin Chandhok
Sohit Khurana
Pete Nolan
Chris Rieger

2. Stochastic Oscillator Assumptions
Upward/downward moving stocks tend to close near the highs/lows of their trading ranges
As the trend matures, stocks close further off their highs/lows

3. Oscillator Parameters
CL = close[today] – lowest low[in %K periods]
HL = Highest High [in %K Periods] - Lowest Low [in %K Periods]
%K = CL / HL
%D [fast] = moving average of %K
%D [slow] = moving average of %D [fast]
Monitor %D for buy/sell signals

4. BUY when cross above lower limit SELL when cross below upper limit
Illustration (S&P500)
BUY when cross above lower limit
SELL when cross below upper limit

5. Optimization & Forecast
Maximize % return over test period ( )
%K period
%D1 period
%D2 period
Upper/Lower thresholds
Apply parameters and forecast out-of-sample ( )

7. Building on this? Need non-Excel platform for optimization
Use both fast & slow %D?
Combine with other technical indicators?