Extra indicators
Stochastic RSI
Applies the Stochastic formula to RSI: where is RSI within its own recent range?
The idea in plain words
RSI often stays between 30 and 70 for long stretches and rarely reaches extremes. Stochastic RSI rescales it, so turning points become more visible.
How it is calculated
RSI(14), then where today's RSI sits between its 14-candle lowest and highest values, smoothed by 3, with a 3-period signal line.
StochRSI = (RSI − lowest RSI) ÷ (highest RSI − lowest RSI) × 100 over 14
%K = SMA(StochRSI, 3), %D = SMA(%K, 3)How to use it
- Above 80 / below 20: short-term overbought / oversold.
- %K crossing %D signals short-term turns.
Drawing conclusions
- Very fast; best used to time entries in the direction of a bigger trend.
Example
In an uptrend Stochastic RSI drops below 20 during a pullback and %K crosses up through %D: a short-term buy signal.
Prices in examples are illustrative.
Watch out for
- Extremely sensitive: many signals, many false.
A little history
Tushar Chande and Stanley Kroll, "The New Technical Trader" (1994).
Educational content only. No indicator or pattern predicts the future, and nothing here is investment advice.