Designed Tushardom Cheyndom and Stanley Kroll, StochRSI an oscillator, which measures the level of RSI (Relative Strength Index) relative to its range for a specified period of time. The indicator is based on RSI and applies to the formula for Stochastics (Stochastic oscillator). The result oscillator, which oscillates between 0 and 1.
In his book "The New Technical Trader", and Cheynd Kroll explained that the RSI is sometimes traded between levels 80 and 20 for an extended period of time, not reaching the levels perekuplennosti and pereprodannosti. Traders looking for opportunities to open a position based on the values perekuplennosti or pereprodannosti of RSI may be a long time to stay out of the game. To increase sensitivity and provide a method for determining the levels of perekuplennosti and pereprodannosti in RSI, Cheynd and Kroll developed StochRSI.
Designed Vélez Vaylderom, RSI is a dynamic oscillators, which compares the value increases with the size of cuts over a period of time. Developed by George Lane, Stochastics is dynamic oscillators, which compares the level of closure to the range maximum / minimum for a given period of time.
* More indicators RSI and Stochastics, see previous issues of the journal.
From the formula above shows that StochRSI uses the formula for Stochastics in relation to RSI, that is, it is an indicator for the RSI. StochRSI measures the value of RSI on the range of maximum / minimum for a fixed number of periods. When the RSI makes a new minimum in the period, StochRSI is 0. When the RSI makes a new maximum in the period, StochRSI will be equal to 100. The significance of .20 means that the current value of RSI is at 20% above the lowest level for the period, or 80% below the highest level. The significance of .80 means that the current value of RSI is at 80% above the lowest level for the period or 20% below the highest level.
Alerts
- The intersection of perekuplennosti and pereprodannosti: If the market-based instruments are in an upward trend, the signal is fed buying when StochRSI moves from the level pereprodannosti (less than .20) higher than .20 On the contrary, when descending trend, sales of the signal fed when StochRSI reduced to the level of perekuplennosti (above .80) below .80.
- Crossing the center line: Some traders track above or below .50 (main line) to confirm the signal and reduce the possibility of fast turn. Movement of pereprodannosti level above .50 can be interpreted as a buy signal, which will be in effect until the decline below .50. On the contrary, the movement from the level below .50 prekuplennosti can act as a signal to sell, which acts to improve the back above .50.
- Positive and negative divergence: A positive divergence, accompanied by confirming increases above .20 can be a buy signal and a negative divergence, accompanied by a decrease below .80 can act as a signal to sell.
- False alarms: Cheynd and Kroll also pay attention that the movement back through the line of the signal points to a false alarm. Increased back above .80 indicates a false alarm sales and traders should close the position.
- A strong trend: As with many oscillators, StochRSI could reach the level perekuplennosti (or pereprodannosti) and remain there for an extended period of time. Movement of the indicator above .80 means perekuplennost, but it may also indicate a strong trend and the indicator may be higher than .80 for a long period of time. On the contrary, the rapid movement of less than .20 may indicate a beginning of a strong downward trend. Movement to 0 and 1 are very strong indicators of the appropriate trend.
Sample
In the example above, action WCOM has reached a maximum in June 1999. and was in chetkovyrazhennom descending trend. A number of cuts to lower and lower increases in the basic trend is confirmed as bearish. According Cheyndu and Kroll, the state is best suited to determine the levels of StochRSI perekuplennosti, which should sell the stock. Every time StochRSI risen above .80 and there are state perekuplennosti. When the indicator has fallen from a level below .80 perekuplennosti ago, send a signal of sale.
From March to June 4 signal indicator filed sales, or one month. Alarm sales in July was not found to be reliable, as well as the possible change of trend. While a number of lower increases and lower cuts continued the downward trend remained intact. A higher bottom at the end of June, accompanied by a higher peak in July, exposing and questioning the reliability of the downward force of the trend. As soon as you have a higher peak, the signals for StochRSI, may require clarification to protect against the rapid spread.
Attempting to buy a share in the raising of the level above .20 pereprodannosti ago would be difficult. Facing rapidly in March and May, which could lead to loss-making transactions. This variability in the vicinity of .20, may also lead to some premature exits from profitable short positions. When the action develops trend downward, sometimes prudent to raise the level to close short positions (buying or receiving of signals). In this case, the trader may need to StochRSI moved from the level above .50 pereprodannosti before closing short positions. This would obviate the danger of the rapid turn of March and May.
Conclusion
It is important to remember that StochRSI is an indicator of an indicator. It is designed to predict the extreme values in RSI before itself RSI reaches these extremes. As an indicator of an indicator, it is further removed from the actual price of the relevant market-based instruments. Because it actually predicts the RSI, but can also be used to predict changes in prices of market instrument, it would have greater sensitivity and is prone to false signals, especially if used incorrectly. As with other indicators, StochRSI be used in conjunction with other indicators and aspects of technical analysis.
In his book "The New Technical Trader", and Cheynd Kroll explained that the RSI is sometimes traded between levels 80 and 20 for an extended period of time, not reaching the levels perekuplennosti and pereprodannosti. Traders looking for opportunities to open a position based on the values perekuplennosti or pereprodannosti of RSI may be a long time to stay out of the game. To increase sensitivity and provide a method for determining the levels of perekuplennosti and pereprodannosti in RSI, Cheynd and Kroll developed StochRSI.
Designed Vélez Vaylderom, RSI is a dynamic oscillators, which compares the value increases with the size of cuts over a period of time. Developed by George Lane, Stochastics is dynamic oscillators, which compares the level of closure to the range maximum / minimum for a given period of time.
* More indicators RSI and Stochastics, see previous issues of the journal.From the formula above shows that StochRSI uses the formula for Stochastics in relation to RSI, that is, it is an indicator for the RSI. StochRSI measures the value of RSI on the range of maximum / minimum for a fixed number of periods. When the RSI makes a new minimum in the period, StochRSI is 0. When the RSI makes a new maximum in the period, StochRSI will be equal to 100. The significance of .20 means that the current value of RSI is at 20% above the lowest level for the period, or 80% below the highest level. The significance of .80 means that the current value of RSI is at 80% above the lowest level for the period or 20% below the highest level.
Alerts
- The intersection of perekuplennosti and pereprodannosti: If the market-based instruments are in an upward trend, the signal is fed buying when StochRSI moves from the level pereprodannosti (less than .20) higher than .20 On the contrary, when descending trend, sales of the signal fed when StochRSI reduced to the level of perekuplennosti (above .80) below .80.
- Crossing the center line: Some traders track above or below .50 (main line) to confirm the signal and reduce the possibility of fast turn. Movement of pereprodannosti level above .50 can be interpreted as a buy signal, which will be in effect until the decline below .50. On the contrary, the movement from the level below .50 prekuplennosti can act as a signal to sell, which acts to improve the back above .50.
- Positive and negative divergence: A positive divergence, accompanied by confirming increases above .20 can be a buy signal and a negative divergence, accompanied by a decrease below .80 can act as a signal to sell.
- False alarms: Cheynd and Kroll also pay attention that the movement back through the line of the signal points to a false alarm. Increased back above .80 indicates a false alarm sales and traders should close the position.
- A strong trend: As with many oscillators, StochRSI could reach the level perekuplennosti (or pereprodannosti) and remain there for an extended period of time. Movement of the indicator above .80 means perekuplennost, but it may also indicate a strong trend and the indicator may be higher than .80 for a long period of time. On the contrary, the rapid movement of less than .20 may indicate a beginning of a strong downward trend. Movement to 0 and 1 are very strong indicators of the appropriate trend.
Sample
In the example above, action WCOM has reached a maximum in June 1999. and was in chetkovyrazhennom descending trend. A number of cuts to lower and lower increases in the basic trend is confirmed as bearish. According Cheyndu and Kroll, the state is best suited to determine the levels of StochRSI perekuplennosti, which should sell the stock. Every time StochRSI risen above .80 and there are state perekuplennosti. When the indicator has fallen from a level below .80 perekuplennosti ago, send a signal of sale.From March to June 4 signal indicator filed sales, or one month. Alarm sales in July was not found to be reliable, as well as the possible change of trend. While a number of lower increases and lower cuts continued the downward trend remained intact. A higher bottom at the end of June, accompanied by a higher peak in July, exposing and questioning the reliability of the downward force of the trend. As soon as you have a higher peak, the signals for StochRSI, may require clarification to protect against the rapid spread.
Attempting to buy a share in the raising of the level above .20 pereprodannosti ago would be difficult. Facing rapidly in March and May, which could lead to loss-making transactions. This variability in the vicinity of .20, may also lead to some premature exits from profitable short positions. When the action develops trend downward, sometimes prudent to raise the level to close short positions (buying or receiving of signals). In this case, the trader may need to StochRSI moved from the level above .50 pereprodannosti before closing short positions. This would obviate the danger of the rapid turn of March and May.
Conclusion
It is important to remember that StochRSI is an indicator of an indicator. It is designed to predict the extreme values in RSI before itself RSI reaches these extremes. As an indicator of an indicator, it is further removed from the actual price of the relevant market-based instruments. Because it actually predicts the RSI, but can also be used to predict changes in prices of market instrument, it would have greater sensitivity and is prone to false signals, especially if used incorrectly. As with other indicators, StochRSI be used in conjunction with other indicators and aspects of technical analysis.
Arthur Hill
stockcharts.com
stockcharts.com
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