A stochastic method observes random occurrences (samples) generated by some probability distribution function In practice, digital computers usually do not model ideal stochastic processes, since most random-number generators actually generate a fixed sequence of values, which may even repeat at some point (Hence, they are dubbed pseudo-random number generators ) Nevertheless, they do a sufficient job for most Monte Carlo simulation purposes; Monte Carlo is another term for stochastic modeling (Compare to deterministic )
Stochastic studies are based on the premise that as prices rise, closing prices tend to be near the high value Conversely, as prices fall, closing prices are near the low for the period Stochastic studies are made of two lines, %D and %K, that move between a scale of 0 and 100 The %D line is the moving average over a specified period of time of the %K line The %K line measures where the closing price is compared to the price range for a given number of periods
Goal-seeking, though not necessarily in a purposive way Any syste3m which modifies itself by means of feedback to its environment in order to attai certai "goals" For a plant, "goals" might be light, water, nutriments, reproduction - the conditions of survival
Involving or containing a random variable or variables; involving chance or probability
Also known as a momentum price velocity indicator Stochastic can be computed for a given time period, e g 10 days or even 52 weeks Computed by dividing the difference between the day's closing price and the n-period historical low by the range between the n-period historical high and low, multiplied by 100 Some economists have found that anomalous returns are associated with momentum trades