What does the Stochastic indicator measure?

The Stochastic indicator is a momentum oscillator that specifically measures the momentum of price movements. Unlike some other indicators, which focus primarily on trend direction or volatility, the Stochastic oscillator provides insight into the strength of a current trend and potential reversal points by comparing a security's closing price to its price range over a specified period.

It’s particularly useful in identifying overbought or oversold conditions, which can signal potential trend shifts. By calculating the relative position of the closing price within the range of prices over a set period (usually 14 periods), the Stochastic oscillator helps traders gauge whether the existing trend is strong or if it is losing momentum, making it fundamentally a tool that reflects trend sensitivity.

This is in contrast to other concepts such as market breadth, monetary policy, or sentiment, which do not specifically pertain to the momentum characteristics or trend analysis provided by the Stochastic indicator.