What Is the Stochastic RSI?


The Stochastic RSI (StochRSI) is an indicator used in technical analysis that varies between zero and one (or zero and 100 on some charting platforms) and is shaped by applying the Stochastic oscillator formula to a set of relative strength index (RSI) values rather than to typical price data. Using RSI values within the Stochastic formula gives traders an idea of whether the current RSI value is overbought or oversold. To put it simply, Stochastics and RSI are based off of price, Stochastic RSI originates its values from the Relative Strength Index (RSI); it is essentially the Stochastic indicator applied to the RSI indicator.


The StochRSI oscillator was developed to take benefit of both motion indicators in order to create a more delicate indicator that is tuned to a specific security's past performance rather than a comprehensive analysis of price change.
The Formulas For the Stochastic RSI (StochRSI) are:

StochRSI= RSI−min[RSI]​
                   max[RSI]−min[RSI]

Where:
RSI = Current RSI reading;
Lowest RSI = Lowest RSI reading over last 14 periods (or chosen lookback period); and
Highest RSI = Highest RSI reading over last 14 period (or lookback period).

How to Calculate the Stochastic RSI
The StochRSI is based on RSI interpretations. The RSI has a contribution value, typically 14, which tells the pointer how many periods of data it is using in its calculation. These RSI levels are then used in the StochRSI formula.
1.     Record RSI levels for 14 periods.
2.     On the 14th period, note the current RSI reading, the highest RSI reading, and lowest RSI reading. It is now likely to fill in all the formulation variables for StochRSI.
3.     On the 15th period, note the current RSI reading, highest RSI reading, and lowest reading, but only for the last 14 period (not the last 15). Compute the new StochRSI.
4.     As each period ends compute the new StochRSI value, only using the last 14 RSI values.
In the next blog will talk about talk about what the StochRSI tells us, how to use it to your advantage and the limitations that it can come with, so stay tuned.







Comments

Post a Comment

Popular posts from this blog

Understanding Liquidity

Image
The concept of  liquidity   has many facades to it. One way to define liquidity is “the ability of an asset to be converted into cash readily on demand”. An additional way of viewing at it is when any asset can be bought or sold at its fair price. Liquidity thus means that there aren’t discounts or bonuses devoted to it during buy or sell and it’s easy to enter and exit the asset. It is believed as more of an item is accepted and sold, the chances of charging premiums or giving discounts lower and such an asset usually trades around ‘what it is worth’. The forex market is often defined as a liquid market with an average turnover of more than $5 trillion daily as of April 2016 according to the Bank for International Settlements (BIS) while real estate is a classic example of an illiquid asset. Property as an asset is less liquid, requiring huge investments into physical form, monotonous procedures and smaller market.  Liquidity is significant for any tradable  asset , wh
Read more

5 Places to Visit in Reykjavík

Image
The capital of Iceland is a young, culturally happening city, as well as a launch pad for natural wonders that people dream of seeing their whole lives. Like any cool spot Reykjavík is also constantly reinventing itself, as you can see at the Grandi Area by the Old Harbour. Here fish packing factories have been turned into sharply designed visitor attractions, while creative murals coat the walls and cutting-edge Nordic restaurants have opened. The waterfront was chosen for the cultural venue, Harpa, a monument for 21st-century Reykjavík with a mesmerising facade by Ólafur Elíasson. You could stay in Reykjavík’s cosy embrace or stride out to visit the volcanic marvels in the Golden Circle and see whales in the Faxa Bay in summer. Hallgrímskirkja: Both a parish church and Iceland’s national sanctuary, Hallgrímskirkja is an ever-present feature of Reykjavík’s skyline. Conceived in the early-1940s by Guðjón Samúelsson, the church was 41 years in the making and was finally con
Read more

Weekly News Overview: Cryptocurrency

Image
Email Extortion Scam Targets Googles AdSense A new extortion scam targeting website owners serving banner ads through Google’s AdSense program has begun circulating the Internet. The malevolent scheme demands Bitcoin (BTC) in exchange for preventing an attack, which would purportedly lead to the users’ AdSense account suspension. The email-based extortion scheme was reported by security news and investigation blog KrebsOnSecurity, on Feb. 17. The blog post detailed that some site owners received a message as their site had been spotted by the malicious program as one seeking revenue from publishing an ad. Coinbase Pitches Crypto As A Solution For Racial Discrimination To mark Black History Month, Coinbase has launched an advertising campaign with the pitch that cryptocurrencies can help tackle racial injustice in the financial sector. As part of the campaign, the exchange published a blog post on Feb. 13 with the results of a survey it conducted in
Read more