Stochastic RSI indicator: indicator from indicator

Stochastic RSI indicator is an ordinary Stochastic indicatorcalculated not on the basis of price values, but on the basis of readings RSI indicator. As a result, the Stochastic RSI trading indicator is more sensitive to price changes, adapting better to the current market condition and volatility. Unlike the standard indicator, the Stochastic RSI has no additional deceleration.

Indicator settings:

  • RSI_Periods - the period of the RSI oscillator;
  • Percent_K - parameter %K of the Stochastic oscillator;
  • Percent_D - parameter %D of the Stochastic oscillator;
  • NumOfBars - the number of history bars, which will be included in the indicator calculations.
 Stochastic RSI indicator
Stochastic RSI indicator

Features of working with the Stochastic RSI indicator

  • Many traders look for divergence in the oscillator readings, which they use to enter the market. In the Stochastic RSI indicator the divergence is weak and it is better not to be guided by it.
  • On the chart of the classic RSI indicator you can draw support and resistance levels, as well as patterns of technical analysis, such as "Head & Shoulders". Despite the fact that the Stochastic RSI indicator is a synthesis of two popular oscillators, this approach also works poorly.

According to experts' observations, Stochastic RSI indicator quite accurately predicts the extremums of the RSI indicator, outperforming the basic indicators. Its combination with other oscillators and trend indicators can serve as a basis for a profitable strategy.

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