What Is Stochastic RSI indicator?
Stochastic RSI (StochRSI) is a technical indicator used in quantitative finance, combining the concepts of the :term;`Stochastic Oscillator` and the Relative Strength Index (RSI). It is primarily used to identify overbought and oversold conditions in a market, as well as potential price reversals. The Stochastic RSI is more sensitive and responsive than the traditional RSI, making it popular among traders looking for early signals.
Key Components:
Relative Strength Index (RSI): RSI is a momentum oscillator that measures the speed and change of price movements. It ranges from 0 to 100, typically with thresholds at 70 (overbought) and 30 (oversold).
Stochastic Oscillator: The Stochastic Oscillator measures the level of the close relative to the range of highs and lows over a certain period. It also ranges from 0 to 100, with common thresholds at 80 (overbought) and 20 (oversold).
Examples:
Buy Signal: When StochRSI moves above 20, indicating the asset might be transitioning out of oversold territory.
Sell Signal: When StochRSI moves below 80, indicating the asset might be moving out of overbought territory.
See also: