Using Exponential Smoothing in Algorithmic Trading.

First, let us start by the usual Stochastic Oscillator before proceeding with the Stochastic Smoothing Oscillator. An overbought level is an area where the market is perceived to be extremely bullish and is bound to consolidate. An oversold level is an area where market is perceived to be extremely bearish and is bound to bounce. Hence, the Stochastic Oscillator is a contrarian indicator that seeks to signal reactions of extreme movements.