Stochastic Oversold: how the strategy works
Stochastic Oversold is a mean reversion strategy in the SmartPaperDesk library. See exactly when it enters and exits, and when it tends to struggle.
Mean reversion Basic Free plan · हिन्दी में पढ़ें
What it does
It reads daily prices. It enters a position when all of the entry conditions below is true, and it leaves when its exit rule, its stop-loss or its time limit is reached.
Entry rule
All of these must be true on the same day:
- Stochastic %K(14) is below 20.
Exit rule
It has no exit signal of its own. It leaves on a stop-loss 8% below the entry, or after 30 days at most.
The idea behind it
Mean-reversion rules buy a sharp dip, using an oversold reading or a stretch away from an average, often only while the longer-term trend is intact.
The bet it makes
It bets that a price stretched far from its usual level snaps back toward it.
When it tends to struggle
A stretched price can keep stretching. In a strong downtrend a dip is not a bargain, it is the trend, and a rule that keeps buying it can take repeated losses.
Test it on paper
You can run this strategy on historical, delayed daily data with estimated charges on the free plan. No real money and no real orders are involved.
Questions people ask
Is Stochastic Oversold a buy signal?
No. It is a rule that describes a setup and has to be tested. A rule that fits one period can fail in another, so check it over a long period with costs included.
What does Stochastic Oversold exit on?
It has no exit signal of its own. It leaves on a stop-loss 8% below the entry, or after 30 days at most.
Learn more
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SmartPaperDesk is an educational paper-trading tool. Strategy pages describe a rule only; they show no results and give no advice.
For educational purposes only. This is not investment advice. Past performance does not guarantee future results.