Stochastic is a momentum oscillator used in trading to compare a security's closing price to its price range over a specific period, helping to identify potential overbought or oversold conditions. The most common form involves two lines: %K, which represents the current closing price’s position relative to the price range, and %D, a smoothed version of %K that serves as a signal line. Traders often look for crossovers between these lines, as well as divergence from price movements, to generate buy or sell signals. Typically, values above 80 suggest overbought conditions, while values below 20 indicate oversold conditions, guiding traders in their decision-making process.