Stochastic RSI in detail and how to use it.The Stoch RSI (Stochastic Relative Strength Index) is a technical analysis indicator used to identify overbought or oversold conditions in financial markets. It is a combination of two popular indicators: the Stochastic Oscillator and the Relative Strength Index (RSI). The Stoch RSI applies the Stochastic Oscillator formula to the RSI values, aiming to provide a more sensitive and faster signal for potential trend reversal.
The Stoch RSI is calculated as follows:
Choose the time period for which you want to calculate the Stoch RSI. The most common period is 14 .
Calculate the RSI: (Detailed post on this in the link below)
Determine the highest and lowest RSI values: Identify the highest and lowest RSI values over the same time period (e.g., 14 days).
Calculate the Stoch RSI: Use the following formula to calculate the Stoch RSI:
Stoch RSI = (Current RSI - Lowest RSI) / (Highest RSI - Lowest RSI)
The resulting Stoch RSI value will range from 0 to 1 (or 0% to 100%). A value above 0.8 (or 80%) typically indicates an overbought condition, suggesting a potential price correction or reversal, while a value below 0.2 (or 20%) indicates an oversold condition, which may represent a buying opportunity.
What does Stoch RSI tell us ?
Stoch RSI is a measure of how fast the RSI is changing. As an analogy. Imagine you are driving your car and have foot on the accelerator which will cause increase in the speed of your cat at every moment, now the rate at which your car's speed increases is acceleration. The bigger the more powerful engine your car has the more acceleration you get and the faster you get to the top speed of your car. So, in this analogy speed of your car at any instant is RSI , acceleration is Stoch RSI and top speed of your car is overbought condition of an asset.
RSI measures who is relatively more aggressive among buyers and sellers at a given instant. Stoch RSI measures how aggressive the buyers or sellers are at a given instant.
So just like in a fight if someone is too aggressive, they are going to spend themselves too quickly and even though they want to fight more they won't be able to until they ease up and relax a bit, this is similar to Stoch RSI of an asset getting to overbought condition and then asset either retraces or takes a pause as buyers are exhausted and need to regain strength by taking profits which turns them into sellers and the asset starts moving in opposite direction.
Why is 80 considered overbought?
The number 80 is chosen based on empirical evidence, suggesting that when the Stoch RSI reaches these extreme values, there is a higher probability of a price reversal or correction. When the Stoch RSI is above 80, it indicates that the asset's price has risen significantly over a short period and could be overextended. In this situation, the asset may be overvalued, and traders may consider selling or taking profits as the price could reverse or correct.
How to use Stoch RSI to enter a trade?
How to enter a Long Trade:
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Step 1. Always use Stoch RSI along with RSI to make a decision:
Step 2. Use it on mid to high term time frame (4h and higher).
Step 3. Make sure both RSI and Stoch RSI are in oversold zone.
Step 4. Make sure the asset is resting on a key support level and holding it.
Step 5. Fearlessly enter the trade.
How to enter a Short Trade:
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Step 1. Always use Stoch RSI along with RSI to make a decision:
Step 2. Use it on mid to high term time frame (4h and higher).
Step 3. Make sure both RSI and Stoch RSI are in overbought zone.
Step 4. Make sure the asset is rejected from a key resistance level and is not able to breach it.
Step 5. Fearlessly enter the trade.
What happens if Support or Resistance is broken in Step 3 above:
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That's where divergences come into play.
What is a divergence?
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Divergence is a technical analysis concept that occurs when the price of an asset and RSI/Stoch RSI indicator move in opposite directions, indicating a potential trend reversal.
There are two types of divergences: bullish divergence and bearish divergence.
Bullish divergence occurs when the price of an asset makes a new low while the RSI/Stoch RSI indicator makes a higher low. Remember from explanation provided in sections above, this suggests that even though the price is going lower there
are more buying activities than selling and the assets are becoming stronger, and a potential trend reversal may be imminent.
Bearish divergence, on the other hand, occurs when the price of an asset makes a new high while the RSI/Stoch RSI indicator makes a lower high.
I have highlighted bullish divergence in chart with purple line. Shown in Red line is bullish Divergence in Stoch RSI, when RSI is not fully oversold, this can happen when a new support is being formed on the chart due to changes in fundamentals of the underlying asset or some news events.
Bullish and Bearish Divergences are even more powerful signals for taking trades, but we must make sure price is holding a support or rejecting from a resistance before taking the trades, otherwise divergences can easily disappear.
Why do traders fail to effectively use RSI?
The primary reason is lack of experience in trading.
Which leads to impatient behavior.
Not knowing how to mark key support/resistance levels.
No risk management skills. (Taking too much risk)
Lack of trust in self when taking trades, (Keep stopping losses too tight which knocks them out of the trades).
I have shown several instances where RSI generated long signals and all of them were successful, the only reason a trader would not be able to use RSI effectively is because of the above reasons.
Stochastic-bullish-divergence
ADAUSD - Upward move coming - 2023!It looks like Cardano it's going to start 2023 well.
On the 4-hour timeframe chart(left), Cardano's price is showing Regular Bullish Divergence. The Divergence is indicated by the Relative Strength Index and the Stochastics.
On the daily timeframe chart(right), Cardano's price is showing an Oversold condition. The Oversold conditions are indicated by the Bollinger Bands, Relative Strength Index, and Stochastics.
Both charts complement each other. The new innovative plans for 2023 are in line with these ideas as well.
Enter your long position only if/when the candle closes above the key level and confirms it as a support.
All further details are shown on the charts.
Good luck!
$DYDX - trendline breakout + stochastic bullish divergenceDYDX printed a bullish divergence on 4h timeframe and is breaking the downtrend
might look into a long position for this
the price is also approaching the resistance level around 4.5, which I expect to be broken soon
let me know what you think about this in the comments
LUNA will bullish soon as we can see the price is under the POC, and from the stochRSI, it's an obvious oversold which mean will see the price going at least to 50 or above, and from the volume profile it's trying to reach the next HVN 112, and even if will see a strong volume the price will get back to point of control
GOLD (XAUUSD) 4H FORECAST Gold gained sharply after hitting an 8-month as Russia and Ukraine tension escalates. The exchange of fire between Kyiv's forces and pro-Russian separatists has affected market sentiment. The number of people who have filed for unemployment benefits rose to 248000 the previous week compared to a forecast of 217000. Philly fed manufacturing index dropped to 16.6 in Feb vs. an estimate of 19.90.
Factors to watch for gold price action-
Global stock market- Bearish (positive for gold)
US dollar index –Bearish (positive for gold)
US10-year bond yield- Bearish (positive for gold)
DISCLAIMER: ((trade based on your own decision ))
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GBPJPY Bullish Possibility GBPJPY bearish movement seems unable to penetrate the strong support. GBPJPY made a base around strong support which indicates the price had big chance turning into a bullish move. A bullish negative divergence is also seen on the Stochastic Indicator. I predict the price will reach the area of 151,570 - 152,217. Because there is a small resistance and the golden ratio of the Fibonacci clusters gathered together in the area of the price range.
ANKR Moon Potential The potential of the coin is amazing. We have a weekly stoch RSI cross forming. Weekly stoch RSI is a very powerful signal.
ANKR current statistics
- Ranked #97
- Already on Coinbase & Binance
- Ankr marketcap is 750 Million
- 6,996,232,711 out of 10,000,000,000 circulating supply
Lets compare marketcaps...
Vechain is worth $8 Billion
Matic is worth $12 Billion
Ankr is worth $750 Million
Also very similar charts ^
A $1.37 Ankr price would = 9 Billion evaluation
A million is $1,000,000
A billion is $1,000,000,000
A Trillion is $1,000,000,000,000
Unique Use Case
- Ankr goal is to provide value in the cloud computing industry. Very ambitous. Cloud computing is a growing industry. Google & Amazo.
Ankr Team
- Comittee of 16 advisors. All have credible backgrounds. I even met one person from the team. Very credible people.
This is not a get rich quick coin. This is for a true investor that seeks value in return. This is alternative to coins such as ADA, VET, & XRP that already proven their value in use & price. I believe Ankr has true potential to succeed and be a top #25 coin.
With such a microcap. This coin weilds very violatile adjustments. This can happen very quick. Especially now since it is listed on Coinbase. Moon city is the goal. Diamond hands.
BW - What a beautiful Weekly chart
Weekend preperation and discovery. I love it when I find something as beautiful a BW on the Weekly time frame. I looked through about 300+ charts today and found 22 that I fell in love with for April.
Explanation:
Focus is the stochastic indicators, mainly the middle and bottom one. The top stochastic is my signal with a shorter setting. It shows me direction and confirmation for trade execution. The idea is to find charts that have stochastic that angle like the one in BW, almost like the stochastic wants to jump out of the indicator and move into the chart. Extremely good and pronounced BULLISH DIVERGENCE.
Price continues to try to move down, while momentum continues to move to the upside. Bullish divergence, trend reversal and dollar signs. I boxed the angle/shape on the stochastic. Hope ya'll enjoy.
Top - Stochastic signal
Middle - Stochastic 14
Bottom - Stochastic 21
Very possible yum yum style for Genius Brands! Kid's ed stockThis children's multimedia education stock is looking truly juicy! I'm all in with a large position! Let'sgooooo!!!!
Do research, think for yourself!
Not investment advice.
Possible breakout situation for Sundial!This fledgling cannabis stonk has a great future ahead of it in my eyes. Just peep their instagram! They're definitely seemingly in-the-know. I'm thinking of this position as a long hold. But also will probably reach a short term peak soon.
Have fun!
Not investment advice
Looks like Apple is breaking out on the daily chart!! Yum yum!!It's sweet to see the behemoth of ESG, Apple, perking up and breaking out! I've bought calls for September 2022 because I think that this stock is going to yum yum heaven, more and more so as it approaches the release of Apple car. The company's goal with their supply chain for all products is to be completely closed loop, using only materials from their old products. Now, that's ESG!
Apple seems like a great long hold. REMEMBER it's not just iPhones... it's a severely underpriced electric vehicle company!
Not investment advice 😊
PS: Should I sell my signals? Would you buy them? Comment below
I should have called it sooner, but this is a breakout situationLordstown motors, makers of electric work vehicles, looks yummy on the medium long term! I bought it around 14 and a half dollars, I would. have called it sooner but wanted to make sure it didn't keep sinking!
Do ya research, and check out the stock!
Could be yum yummiest of styles!
Not investment advice
A surprise, very erect looking candle hath appeared? What next?!This is a stochastic surprise this morning! Is this a moon Friday? Let's see! I have 44 call options contracts with a strike price of $5 so it would be awesome if it went in that direction! Anyways, this is an odd looking candle and could be a breakout! This children's educations stock has a lot going for it! Value ESG investing but hella volatile and profitable...
Not investment advice.
A setup for what could be the most severe meow meow style ever!Within the year, we've seen price action from $.04 to $.08 for a 100% profit. Now I believe this gorgeous stonk is setting up to do multiples. I'm YOLOing much of my portfolio on this stock in order to pay for the development and launch of the app for activism I invented so I really really hope this moons!
NOT investment advice.
Have fun!!!
Warning: this stock is EXPLOSIVE and possibly life changing!
$SNDL looking like it's making a comeback? What will happen nextI am not sure what will happen, but I really hope it skyrockets, because I YOLO'd much of my portfolio on it in order to pay for my business which is launching an app for activism to save the world. I bought $.05 call options expiring tomorrow with a strike price of $1.50. Either an excellent idea or a terrible one! Let's see! To the moon!
Have fun! Good luck!
Not investment advice
It looks like $GNUS has far to go! Train has left the station!!wowza! The stock hit $2 today! I called it at $1.67 yesterday! I say it goes into the teens before long... who knows when!! HODL?
not investment advice
Pole Dancer formation - do we have a yum yum style breakout?The chart is looking good! Companies like this are the future of cgildren's education. This stonk may be YOLO worthy...
Do your research!