Stoch RSI (Stochastic Relative Strength Index) is an indicator that traders commonly have used a lot in stock and crypto tradings.
It combines 2 indicators, Stochastic Oscillator and RSI (Relative Strength Index) and it is mainly used for forecasting entry and exit points of trading.
While simpler and basic tools like RSI, MACD, MA etc. are more popular and have used more, this combined tool could make trades more efficient.
Stoch RSI is calculated from data about an asset or cryptocurrency collected over the last 14 periods. It is possible to know if an asset enters the overbought and oversold zones.
The concept of Stochastic Oscillator was introduced first in 1950s and the combined new concept Stoch RSI was released in 1990s. The indicator concept is very old and also new.
The value of this indicator is in a range of 0 and 100. When the value is over 80, the asset is considered overbought. Reversely, the value is below 20, it is considered the asset is under the oversold status.
The ways to utilized this indicator is almost same with other momentum indicators.
Trader could consider to sell or buy when the value is on oversold or overbought zone. And Trader could look out for divergence. It is bull signal when the price of an asset shows lower low while Stoch RSI reaches new high level. Bear case is vise-versa.
And trader could use the signal that K line cross over D line as a strong signal.
But as all traders know, this indicator may be wrong or correct for very short time that is almost meaningless for profitable trades. This another combined indicator is necessary to be used with other indicators or trading analysis based on different timeframes.
This post was also published on Medium on April 3, 2025, by the same author.
