What is the Stochastic RSI?

(STOCH RSI) — Kolin Lukas

Definition

The Stochastic RSI indicator (Stoch RSI) is essentially an indicator of an indicator. It is used in technical analysis to provide a stochastic calculation to the RSI indicator.

This means that it is a measure of RSI relative to its own high/low range over a user defined period of time.

The Stochastic RSI is an oscillator that calculates a value between 0 and 1 which is then plotted as a line. This indicator is primarily used for identifying overbought and oversold conditions.

History

The Stochastic RSI (Stoch RSI) indicator was developed by Tushard Chande and Stanley Kroll. They introduced their indicator in their 1994 book The New Technical Trader.

Calculation

In this example, a very common 14 Period Stoch RSI is used.

Stoch RSI = (RSI — Lowest Low RSI) / (Highest High RSI — Lowest Low RSI)

Here are some approximate benchmark levels:

• 14 Day Stoch RSI = 1 when RSI is at its highest level in 14 Days.
• 14 Day Stoch RSI = .8 when RSI is near the high of its…