Stochastic RSI

Description:

The StochRSI is a momentum indicator that combines two well-known technical indicators, the Relative Strength Index (RSI) and the Stochastic Oscillator. It was developed by Tushar S. Chande and Stanley Kroll and was first described in their book “The New Technical Trader,” published in 1994. The StochRSI is designed to provide a more precise and sensitive reading of RSI by measuring the level of RSI relative to its range over a specific period.

Input Parameters:

RSI Length: Number of RSI periods used in the calculation.
Stoch Length: Number of Stochastic periods used in the calculation.
%K Length: The %K line represents the current closing price as a percentage of the price range over a specified period.
%D Length: The %D line is a moving average of the %K line, usually calculated as a 3-day simple moving average.
Upper: The threshold, typically set at 80, indicates overbought conditions in the indicator.
Lower: The threshold, commonly set at 20, suggests oversold conditions in the indicator.

Use Case:

Overbought/Oversold Conditions: It can be used to identify overbought and oversold conditions in the market. When the StochRSI value reaches 0, it may indicate that the security is oversold and could be due for a price reversal. Conversely, when the StochRSI value reaches 1, it may indicate that the security is overbought and could be due for a price correction.
Divergences: Stochastic RSI can also identify divergences between the indicator and price. When the price of a security is making higher highs, but the Stochastic RSI is making lower highs, it may indicate a bearish divergence. Similarly, when the price of a security is making lower lows, but the Stochastic RSI is making higher lows, it may indicate a bullish divergence. Traders can use these divergences to make informed decisions about entering or exiting position.
Crossovers: It can also be used to identify crossovers between the indicator and a signal line. Traders can use these crossovers to make informed decisions about entering or exiting a position. For example, when the StochRSI crosses above its signal line, it may indicate a bullish signal, while a crossover below the signal line may indicate a bearish signal.

This feature can be used in: