Stochastic Oscillators can be used as both short - and intermediate-term trading oscillators depending on the number of time periods used when calculating the oscillator. When displaying a short term Stochastic Oscillator (e.g., 5-25 days), it is popular to slow the %K value by 3-days.

Analyst John Murphy, in his Technical Analysis Of The Financial Markets, recommends using a 14-period %K line with a three-period %D line, and looking for divergence between stochastic and price as a signal. A bearish setup is a combination of two declining highs for %D at values greater than 80; when this occurs, prices continue to climb higher and a bearish divergence exists. A bullish setup is %D with values less than 20; when rising lows form, prices continue lower and a bullish divergence exists, indicating a buy. If the setup is correct, then the actual buy or sell signal occurs when the faster %K crosses the %D.