StochRSI

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DEFINITION of 'StochRSI'

An indicator used in technical analysis that ranges between zero and one and is created by applying the Stochastic Oscillator formula to a set of Relative Strength Index (RSI) values rather than standard price data. Using RSI values within the Stochastic formula gives traders an idea of whether the current RSI value is overbought or oversold - a measure that becomes specifically useful when the RSI value is confined between its signal levels of 20 and 80.

INVESTOPEDIA EXPLAINS 'StochRSI'

The StochRSI is deemed to be oversold when the value drops below 0.20, meaning the RSI value is trading at the lower end of its predefined range, and that the short-term direction of underlying security may be nearing a correction. Conversely, a reading above 0.80 suggests the RSI may be reaching extreme levels and could be used to signal a pullback in the underlying security.

RELATED TERMS
  1. Indicator

    Indicators are statistics used to measure current conditions ...
  2. Oversold

    1. A condition in which the price of an underlying asset has ...
  3. Overbought

    1. A situation in which the demand for a certain asset unjustifiably ...
  4. Relative Strength Index - RSI

    A technical momentum indicator that compares the magnitude of ...
  5. Correction

    A reverse movement, usually negative, of at least 10% in a stock, ...
  6. Technical Analysis

    A method of evaluating securities by analyzing statistics generated ...
RELATED FAQS
  1. How effective is creating trade entries after spotting a StochRSI pattern?

    Common momentum oscillators typically signal overbought conditions with readings over 80 and oversold conditions with readings ... Read Full Answer >>
  2. How do I implement a forex strategy when spotting a StochRSI pattern?

    The StochRSI indicator is used in forex trading as it is in stock or options trading. Though it is often used to identify ... Read Full Answer >>
  3. How do I build a profitable strategy when spotting a StochRSI pattern?

    The most common use of the stochRSI in the creation of trade strategy is to look for readings in the overbought and oversold ... Read Full Answer >>
  4. How are StochRSI patterns interpreted by analysts and traders?

    While both the relative strength index (RSI) and the stochastic oscillator measure momentum, they do so by analyzing different ... Read Full Answer >>
  5. What is the difference between fast and slow stochastics in technical analysis?

    The main difference between fast and slow stochastics is summed up in one word: sensitivity. The fast stochastic is more ... Read Full Answer >>
  6. Would a slow stochastic be effective in day trading?

    Given the hundreds of indicators that are available to traders, finding the appropriate technical tools to use in day trading ... Read Full Answer >>
  7. What technical tools can I use to measure momentum?

    One of the main goals of every trader using technical analysis is to measure the strength of an asset's momentum and the ... Read Full Answer >>
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