Double Smoothed Stochastic
Type
Momentum oscillator
Short introduction
The "Stochastic" indicator was the subject of various improvement efforts. The Double Smoothed Stochastic (DSS) was developed by William Blau and published in 1991. It is derived from the Stochastic indicator (in the most commonly used slow variant) and uses double exponential smoothing instead of linear smoothing.
The Double Smoothed Stochastic is primarily aimed at supporting swing traders to detect signals of over and under selling. The DSS is displayed in a separate chart.
Formula/calculation
DSS = 100* EMAy(EMAx( C - Ln )) / EMAy(EMAx( Hn – Ln ))
where:
n = number of periods for the range
x,y = Period figures for double smoothing
For the two smoothing periods and the signal line, the following MA variants can be used for smoothing via the parameters:
- Simple MA (SMA) - Default signal setting
- Exponential MA (EMA) Standard smoothing setting
- Weighted MA (WMA)
Interpretation
- A buy signal is generated if the DSS crosses the 50% line from below.
- A sell signal is generated if the DSS crosses the 50% line from the top.
- The market is considered "oversold" if the DSS falls below the 30% line.
- The market is considered "overbought" if the DSS rises above the 70% line.
Default setting
- n = 5
- x = 7
- y = 3
Example: DSS
