Stochastic Oscillator-Time & Frequency Stats

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The Stochastic Oscillator Time & Frequency Statistics indicator is a tool designed to enhance your trading decisions by combining the traditional Stochastic Oscillator with additional metrics and visual aids. Although the Stochastic Oscillator is typically used to indicate trend direction and overbought/oversold conditions, the %K and %D lines can cross over and under multiple times while in the critical zones. The statistics added to this indicator allow traders to assess the probability of multiple crossover signals occurring on an asset or within various time frames. Signal levels and definitions of critical zones can be adjusted while the statistics are automatically updated to the relevant ticker, time frame and thresholds. Visual preferences such as colors and signal shapes can also be customized.

The Stochastic Oscillator is a commonly used momentum indicator developed by George Lane. It measures the position of the current closing price relative to the asset's recent high-low range over a set period. This advanced version calculates various probability and frequency statistics to better understand the oscillator’s behaviour and guide our strategies and risk management. Some key questions that this indicator intends to address are:
How long does the average momentum last in a trend?; How long does the oscillator remain in the critical zones?; How many times could one expect crossovers/unders' to occur in critical zones before momentum changes?; And, at what price does the candle need to close for the k & d lines to cross and signal a momentum shift?

Statistics & Probabilities:
The indicator calculates important time and frequency-based metrics that provide deeper insight into the behavior of the Stochastic Oscillator. These are displayed in a text box on the indicator panel, including:

Avg Long:The average number of bars between the last long signal before exiting the critical oversold zone and the next short signal in the overbought critical zone, including the standard deviation and the sample size within the relevant time frame.
Avg Short: The average number of bars between the last short signal in the overbought critical zone and the next long signal in the oversold critical zone, including the standard deviation and the sample size within the relevant time frame.
Time in Oversold: The average time (in bars/candle sticks) that the Stochastic Oscillator's %K & %D lines both spend in the oversold region (below the buy signal level) after entering and before departing the oversold region, along with the standard deviation.
Time in Overbought: The average time (in bars/candle sticks) that the Stochastic Oscillator's %K & %D lines both spend in the overbought region (above the sell signal level), after entering and before departing the overbought region, along with the standard deviation.
Signal Frequency: It calculates the percentage of long or short signals that occur consecutively within the critical zone before the opposing signal occurs (e.g., 1Long: 40.54%, 2 Long: 28.55%, 3Long: 17.4%, >3 Long: 13.51%, 1Short: 36.15%, 2Short: 30.41%, 3Short: 17.57%, >3Short: 15.88%). This is calculated for 1 through 6 consecutive occurrences and summarised for more than 6 consecutive signals

Key Features:

Oversold: Typically When the Stochastic Oscillator is below 20, it indicates that the asset may be oversold, potentially signalling a buying opportunity. The threshold for "overbought" and "oversold" extreme regions can be adjusted
Overbought: When the Stochastic Oscillator is above 80, it suggests the asset may be overbought, and a downturn might be near.
Stochastic Slope: The slope of the Stochastic Oscillator indicates the prominent trend direction within the selected time period.
Customizable Buy/Sell Signal Levels: The indicator allows customizable levels for detecting oversold (typically below 20-25) and overbought (typically above 75-80) conditions, helping one spot potential reversal zones for initiating long or short trades.
Crossover Alerts:The indicator tracks crossovers between the %K and %D lines, generating:
Long signals: When a crossover occurs below the buy signal level (indicating oversold conditions).
Short signals: when a crossunder occurs above the sell signal level (indicating overbought conditions).
The signals are visualized as labels on the chart:
- **L** for potential long (buy) signals: Marked below the bars when the %K line crosses above the %D line.
- **S** for potential short (sell) signals: Marked above the bars when the %K line crosses below the %D line.

Disclaimers:

No Guarantees: The indicator is provided "as-is" without any warranties or guarantees of accuracy, completeness, or fitness for a particular purpose. The outcomes or performance of trades executed using this indicator are not guaranteed to be successful or profitable.
User Responsibility: You are solely responsible for any trading decisions you make based on the use of this indicator. All trading and investment activities involve risk, and it is essential to conduct your own research, analysis, and due diligence before making any financial decisions.
No Liability: The creator of this indicator is not responsible for any financial losses, direct or indirect, incurred as a result of using this indicator. This includes, but is not limited to, loss of profits, loss of capital, or any other negative financial outcomes.
Market Risks: Markets are volatile, and prices may fluctuate significantly. Trading and investing carry inherent risks, and there is always the potential for loss. You should only trade with capital that you can afford to lose.
Independent Advice: This indicator and the content generated by its creator does not constitute financial advice and is for entertainment purposes only. It is strongly recommended that you seek independent financial advice from a qualified and licensed professional before making any trading or investment decisions based on the use of this indicator.

By using this indicator, you acknowledge that you fully understand and accept the risks involved, and you agree to indemnify and hold harmless the creator of this indicator from any claims, damages, or liabilities arising from its use.

The author of this script has made every effort to ensure that the code is an original interpretation and application of the open-source **Stochastic Oscillator**, as developed by George Lane. The script reflects a unique adaptation aimed at enhancing trading strategies through advanced statistical analysis and trade management features. The author does not claim any proprietary rights over the foundational concepts of the **Stochastic Oscillator** and does not intend to infringe upon any existing copyrights. Should any copyright infringement be identified, the author commits to removing the indicator immediately and forfeits any rights to further or intended financial gain from its use.