What Is the Stochastic RSI?
The Stochastic RSI (StochRSI) is an indicator used in technical analysis that ranges between zero and one (or zero and 100 on some charting platforms) and is created by applying the Stochastic oscillator formula to a set of relative strength index (RSI) values rather than to standard price data. Using RSI values within the Stochastic formula gives traders an idea of whether the current RSI value is overbought or oversold.
The StochRSI oscillator was developed to take advantage of both momentum indicators in order to create a more sensitive indicator that is attuned to a specific security's historical performance rather than a generalized analysis of price change.
KEY TAKEAWAYS
A StochRSI reading above 0.8 is considered overbought, while a reading below 0.2 is considered oversold. On the zero to 100 scale, above 80 is overbought, and below 20 is oversold.
Overbought doesn't necessarily mean the price will reverse lower, just like oversold doesn't mean the price will reverse higher. Rather the overbought and oversold conditions simply alert traders that the RSI is near the extremes of its recent readings.
A reading of zero means the RSI is at its lowest level in 14 periods (or whatever lookback period is chosen). A reading of 1 (or 100) means the RSI is at the highest level in the last 14 periods.
Other StochRSI values show where the RSI is relative to a high or low
The Formulas For the Stochastic RSI (StochRSI) are:
\begin{aligned} &\text{StochRSI}=\frac{RSI-\min\left[{RSI} \right ]}{\max\left[{RSI} \right ] - \min\left[{RSI} \right ]}\\ &\textbf{where:}\\ &RSI = \text{Current RSI reading}\\ &\min\left[{RSI} \right ] = \text{Lowest RSI reading over the last 14 periods}\\ &\;\text{(or your chosen lookback interval)}\\ &\max\left[{RSI} \right ] = \text{Highest RSI reading over the last 14 periods}\\ &\;\text{(or your chosen lookback interval)} \end{aligned}âStochRSI=max[RSI]âmin[RSI]RSIâmin[RSI]âwhere:RSI=Current RSI readingmin[RSI]=Lowest RSI reading over the last 14 periods(or your chosen lookback interval)max[RSI]=Highest RSI reading over the last 14 periods(or your chosen lookback interval)â
How to Calculate the Stochastic RSI
The StochRSI is based on RSI readings. The RSI has an input value, typically 14, which tells the indicator how many periods of data it is using in its calculation. These RSI levels are then used in the StochRSI formula.
Record RSI levels for 14 periods.
On the 14th period, note the current RSI reading, the highest RSI reading, and lowest RSI reading. It is now possible to fill in all the formula variables for StochRSI.
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.
As each period ends compute the new StochRSI value, only using the last 14 RSI values.#Dyor #Cryptopredictor #BTC #Bitcoin #Ethereum
