Practical Applications of Stochastics RSI That Traders Should Know

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What is Stochastic RSI? Understanding its Basic Structure

Stochastic RSI (StochRSI) is widely recognized as a technical analysis tool used to determine overbought and oversold conditions in the market. This indicator is a derivative tool that combines the logic of the Relative Strength Index (RSI) with the Stochastic Oscillator, and can be considered a type of “indicator of an indicator.”

This tool, first introduced in “The New Technical Trader” written by Stanley Kroll and Tushar Chande in 1994, was initially utilized in the stock market, but is now applied in various markets such as foreign exchange and cryptocurrencies.

Basic Calculation Logic and Numerical Range

Stochastic RSI is derived by applying the Stochastic Oscillator to the regular RSI. The result is a single value that fluctuates around a central value of 0.5 within a range of 0 to 1. However, depending on the display format, it may be multiplied by 100 and displayed in a range of 0 to 100, in which case the center line is 50.

The calculation formula is as follows:

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