The Laguerre Stochastic is similar to a 4-period regular Stochastic, except that a Laguerre transform has been applied for price smoothing. The Laguerre transform is a mathematical technique that allows smooth indicators to be built using small amounts of data.
How do I use it?
- Never use this indicator as standalone trading signal, it should be used as confluence.
- When the value is above the middle line this shows the bullish trend is strong.
- When the value is below the middle line this shows the bearish trend is strong.
- When the value crosses above the upper line this indicates the trend may reverse downwards.
- When the value crosses below the lower line this indicates the trend may reverse upwards.
- When the value crosses above the signal this indicates the current bearish trend is getting weak and may reverse upwards.
- When the value crosses below the signal this indicates the current bullish trend is getting weak and may reverse downwards.
- Oscillator value indicating the difference between highs and lows fractioned by the close price.
- %D value acting as a smoothed version of the %K.
- Horizontal lines such as oversold, overbought and middle lines, indicating possible interest zones.
How does it work?
1 — Calculate regular Stochastic value.
2 — Apply the Laguerre transform.
3 — Calculate %D value by applying smoothing to the %K value.
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.