Worden Stochastics
Categories: Metrics, Accounting
Investors love averages...that is, until they’re skewed and misleading. For a long time, investors were using traditional stochastics: a popular stock indicator created in the 1950s. Traditional stochastics compares the closing price of a security to other prices that the security has been over a certain time period, which helps investors see if a stock has been overbought or oversold.
Worden Stochastics, like regular ol’ stochastics, is used to see if a stock is overbought or oversold. Unlike traditional stochastics, Worden Stochastics uses rankings rather than prices (high, low, and closing) for its calculations, which reduces the weight that pesky outliers can have on averages.
The TL;DR is that Worden Stochastics is a stock momentum indicator that is weighted to reduce outlier influences in order to determine if a stock is oversold or overbought.