AMA STL Color indicator. How to use it correctly?

The AMA STL Color indicator is a specialized algorithm for the MT4 trading platform. You can use the described algorithm to quickly assess the situation that has developed on the chart of the selected asset and identify the optimal moments for creating successful positions.

As the name suggests, this algorithm is an improved version of the time-tested AMA tool. The signals of the algorithm under consideration are displayed in the form of a curve near the price level, the location and shade of which changes depending on the situation on the chart of the selected asset.

Such signals are extremely simple and clear, due to which even a beginner speculator who is just getting acquainted with the foreign exchange market can effectively use the described algorithm.

Signals of the AMA STL Color indicator retain an acceptable level of accuracy at almost any time intervals and currency pairs, which makes it a fairly versatile tool.

To download the AMA STL Color indicator, use the link that you can see below.

Download AMA STL Color indicator

AMA STL Color indicator. Optimization

The installation procedure for the described algorithm is elementary. You do not need any skills or knowledge to complete this task. In order to get acquainted with the parameters of the considered algorithm, you just need to transfer the described algorithm to the chart of the selected asset.

indikator ama stl color kak pravilno ispolzovat

The considered algorithm has the following parameters:

  1. “Range”. This parameter is responsible for how many bars the described algorithm will analyze in the process of generating signals.
  2. “Fast-MA”. In this field, you can set the period of the first curve, which is part of the considered algorithm.
  3. “Slow-MA”. This parameter is responsible for the value of the slow curve integrated into the considered algorithm.
  4. Count-Bars. In this field, you can specify the number of bars from history that the described algorithm will take into account when performing all the necessary calculations.
  5. “Filter”. This parameter allows you to configure the operation of the filter, which will filter out false signals.

Due to the fact that the described algorithm has only four adjustable parameters that affect the correctness of its functioning, not only a speculator with a certain trading experience, but also a beginner can handle the optimization process.

Algorithm application

It is extremely simple to use the considered algorithm for making money in the foreign exchange market. You need to transfer the AMA STL Color indicator to the chart of the selected asset and optimize it. Then you just need to wait for the next signal and create a position in the desired direction.indikator ama stl color kak pravilno ispolzovat

As soon as the curve of the considered algorithm crosses the price of the selected asset from above and turns blue, you should create a buy position. A change in the hue of the curve is a signal to close a previously created buy position.

After the curve of the algorithm under consideration crosses the bottom of the price of the selected asset and turns red, you should promptly create a sell position. It is recommended to take the reverse change of the curve color as a signal for the prompt closing of a sell order.

To learn how to correctly optimize and apply the algorithm in question, use a demo account. To accumulate the necessary experience and skills in using this technical tool, use a demo account.

MACD indicator on Dema Four Colors

The MACD on Dema Four Colors indicator is a specialized algorithm for the MT5 trading platform. Using this technical tool, you can quickly analyze the situation on the chart of the selected asset and identify the optimal moment for creating successful positions.

As you can see from the name of the algorithm in question, it is an improved version of the time-tested technical tool MACD. It has a more sophisticated formula that is used to perform all the necessary calculations, as well as more visual signals.

The signals of the described algorithm are displayed in a separate window under the price level in the form of bars, the location and shade of which depends on the current situation on the chart of the selected asset. It is as simple as possible to use such signals, so this technical tool can be safely recommended to all novice speculators. Since the accuracy of the signals issued by the algorithm under consideration remains at an acceptable level on almost any time interval and currency pair, it can be called truly universal.

MACD indicator on Dema Four Colors. Optimization

The installation procedure for the considered algorithm is extremely simple. You do not need any special skills or experience to complete this task. To familiarize yourself with the parameters of the described algorithm, you need to transfer it to the chart of the selected asset.

indikator macd on dema four colors

To effectively use the described algorithm, you need to make changes to the following parameters:

  1. “MACD-period-for-Fast-average-calculation”. In this field, you can adjust the fast curve, which is part of the considered algorithm.
  2. “MACD-period-for-Slow-average-calculation”. This parameter is responsible for adjusting the slow curve integrated into the considered algorithm.
  3. “MACD-period-for-difference-average”. In this field, you can set the period of the signal curve of the described algorithm.
  4. “MACD-type-of-price”. This parameter is responsible for the type of price level that the described algorithm will use to perform all the necessary calculations.

Due to the fact that the described algorithm has only four adjustable parameters, not only a speculator with a certain trading experience, but also an inexperienced beginner can cope with the process of its optimization.

Algorithm application

It is extremely simple to use the described algorithm to make money on the foreign exchange market. You just need to transfer the MACD on Dema Four Colors indicator to the chart of the selected asset and perform the optimization procedure. Then you just need to wait for the next signal to appear and create a position in the desired direction.indikator macd on dema four colors

As soon as the bars of the described algorithm from below cross the center line and change their shade from red to blue, you will need to create a buy position. The buy order must be closed quickly as soon as the shade of the bars changes from blue to orange.

At the moment when the bars of the described algorithm cross the center line from above and change their shade from orange to yellow, you should create a sell position. This order should be closed quickly after the bars change from yellow to red. To obtain the necessary experience and skills in applying the described algorithm, use a demo account.

Reverse MACD indicator

The Reverse MACD indicator is a specialized algorithm for the MT4 trading platform. Using the algorithm under consideration, you can fairly quickly assess the situation that is currently on the chart of the selected asset and identify the optimal places for creating successful positions.

As you can see from the name of the algorithm in question, it is an improved version of the popular MACD tool. The key difference between the described algorithm and the instrument on the basis of which it was created is that its signals are displayed not in a separate window under the price level, but in the vicinity of the asset price in the form of a curve, which changes its location and shade depending on the market situation.

These signals are extremely easy to use in the process of trading on the foreign exchange market, which makes it possible to recommend the considered algorithm to any beginner. The accuracy of the issued signals maintains an acceptable level of accuracy at almost any time interval and time interval, which makes the Reverse MACD indicator truly universal.

To download the Reverse MACD indicator, use the link that can be found below.

Download Reverse MACD indicator

Reverse MACD indicator. Optimization

The installation procedure for the considered algorithm is elementary. To successfully cope with this task, you do not need any knowledge or experience. To get acquainted with the parameters of the considered algorithm, it must be transferred to the chart of the selected asset.

indikator reverse macd

Before you start using the described algorithm, you need to make changes to the following parameters:

  1. “Fast-EMA-Period”. This tunable characteristic is responsible for tuning the fast line, which is integrated into the considered algorithm.
  2. “Slow-EMA-Period”. In this field you can configure the slow line included in the described algorithm.
  3. “Signal-EMA-Period”. This parameter is responsible for setting the signal curve, which is part of the considered algorithm.

This technical instrument has three more additional parameters, but it is not necessary to optimize them for successful trading. Since you need to make changes to only three adjustable parameters that affect the correct functioning of the Reverse MACD indicator, not only an experienced speculator, but also any beginner can handle the process of its optimization.

Algorithm application

To start using the described algorithm for making money on the foreign exchange market, you need to transfer it to the chart of the selected asset and perform the optimization procedure. Then you just need to wait for the next signal to appear and create a position in the desired direction.indikator reverse macd

As soon as the line of the considered algorithm changes its color from yellow to red, you should quickly open a sell position. After changing the hue of the curve to yellow, sell orders must be closed quickly.

After the curve of the considered algorithm changes its shade from yellow to green, you need to create a buy position. It is recommended to close this trade quickly after the line turns yellow.

Achieving maximum income, as well as reducing the likelihood of losses, is possible only if you use the described algorithm within a particular trading system. To learn how to properly configure and apply the algorithm in question, use a demo account. You can start trading with real money only after you have gained the necessary experience.

Using Swing Highs and Swing Lows

Why is Using Swing Highs and Swing Lows important to trading?

The key to having consistent profits in the forex market is understanding why something happened. Everything you see on your charts, from the candles and Candle pattern up to the swing highs and swing lows, formed for a reason. Understanding why these things formed can give you a much clearer picture of what is going on in the market and what could happen in the near future.

Unfortunately, most traders do not know the reasons why the things shown on the charts occur. Most are able to tell when something like a candle pattern appears. But only a few are able to say what actually caused this pattern to develop.
The same goes for swing highs and swing lows.

Using Swing Highs and Swing Lows

All traders can tell when a swing high or swing low has formed. But practically no one can tell you what action caused the low or high on the charts. If traders knew why the lows and highs formed, they would be able to make better decisions. You are wasting the probability of the direction in which the market will move and where it is best to place the trades.

By the end of this book, you will understand why swing highs and swing lows form in both uptrends and downtrends. You will be able to determine which swings are more important than others by analyzing the amount of buy or sell orders that were in the market at the time the swing was made.

Forex Trend Rider makes good profits

Riding the TrendMaking money in Forex trading is a lot easier than it is presented. There are a lot of complicated indicators out there that are total rubbish. Many of them are so complicated to use and don’t even work! Today I am introducing a trading system that is not only easy to use, but also makes good profits. This trading system makes profits with RIDING THE TREND!

There are hundreds and thousands of forex traders worldwide executing trades. But the most influential traders are the banks. The only real way to make money is to act in the same direction as the banks. Anyone who trades in the opposite direction will soon have cleared their balance.

Determining the trend of the forex market is not an easy task. That’s why we released the epic Forex Trend Rider. It identifies the trend and tells you when to get in based on the trading volume.

What is a Renko chart and what is it used for?

Renko comes from the Japanese word -renga- and describes a brick. If you look at a Renko chart you will understand why.

What is a Renk chart

The Renko charts are a great way to analyze the market from a completely different perspective.
If you like it and are looking at the raw price action then Renko charts are certainly well worth the time to learn.

Harmonized course

Their main strength lies in the fact that they simplify price history and allow a better understanding of markets that are volatile.

The Renko chart works in a unique way. Small, noisy price movements are hidden. This allows you to uncover the important things like trends, support and resistance. With the right understanding, Renko chart analyzes can provide insights that could be overlooked in conventional candlestick charts.

What is a Renko chart – explanation?

Renko charts don’t work in the same way as traditional candlestick charts. They represent the price on the vertical axis, but the similarity is over by then.

Each new bar on a Renko chart is a block or a brick. And a brick is drawn whenever the price of the instrument rises or falls by a certain market value. This means that the chart only moves forward on the time axis when the price changes.

Renko-Chart

Unlike normal Candlestick charts Renko chart patterns always consist of regular diagonal up and down lines.

How to understand trends in Renko charts?

Working with Renko charts requires a different way of thinking. This is because with this charting method the pattern only changes when the price moves up or down a fixed amount.

Renko charts never move horizontally, they just move up or down by the same fixed points / pips amount. That makes the understanding of trends somewhat unclear at first.

If the price of the underlying accelerates in a strong trend, this is shown on a regular chart as a steeper line on the vertical axis of the plot. This represents a faster rate of change in course over time.

In the Renko chart, on the other hand, more points or blocks are drawn in to show the rate at which the course has accelerated. The stronger the trend, the more Renko bricks will be drawn on the chart during this period.

This in turn means that the time axis in the Renko chart is not fixed, but rather expands or contracts according to the strength of the trend.

  • Strong trend = more bricks plotted
  • Weak trend = fewer bricks plotted
  • No trend = no plotted bricks

An example: The size of a Renko brick is set to 30 points / pips. Each block represents a fixed unit of price movement. The Renko chart only adds a new block and advances in the chart when the price moves up or down by exactly 30 points / pips.

During times when the market is trending sideways, the Renko chart does not change.

Comparison of a candlestick chart with the Renko chart within the same period

In the two following charts we compare one Currency pair over the same period.

The first diagram is a normal candlestick diagram. The second is a Renko chart. The corresponding highs and lows are marked in both charts as points 1 to 5 for comparison.

In both charts, the distance between points 1, 2 and 3 is roughly the same. But from the moment the price drops abruptly after point 3, the Renko chart no longer reacts in the same way.

What is a renko chart

What is a Renko Chart

The time axis in the Renko chart is variable, so that this rapid decline in prices is represented by a faster forward movement or recording of the Renko bricks. In essence, the Renko chart removes the time and rate of change components from the chart. He replaces these with the price and the rate of chart progress by drawing the building blocks at a faster or slower rate.

The whole point of this is to hide the small, random price fluctuations. These do not play a role in understanding a trend.

While this may sound confusing, a Renko chart can provide insights into trends that might otherwise be overlooked.

If you compare the different chart displays, the Renko chart usually has a lot less noise in the price display. The trends, the highs and the lows are easier to identify.

Fixed vs. Variable Block Size

One of the sticking points of the standard Renko system is the fixed block size. In real markets, the extent of price changes is not fixed, but dynamic. This is known as market volatility.

A 50 points / Pips Brick size may be appropriate at certain times. However, this is not always the case. In most markets, volatility changes from day to day, week to week, and year to year.

To get around this, most Renko chart systems use a volatility setting instead of a constant block size. Instead of a fixed size for each increment, or decrement, the size is set according to a measure of volatility known as ATR or Average True Range. In this way, the brick size represents a unit of volatility rather than a fixed unit of price.

This avoids the need to set a rather arbitrary block size. Instead, the chart will resize as volatility changes over time.

Uses for Renko charts

Renko charts are particularly useful for finding areas of support and resistance. Long static periods condense and provide appropriate information. Many traders find it easier to see where price support and price resistance are occurring.

Renko charts can also be helpful in the following chart analyzes:

  • Recognize trends and patterns that remain hidden in time-based representations.
  • Analyze volatile markets or see where volatility changes over time.
  • Simplify complicated chart structures.
  • Look for course breakouts and course range areas

Technical tools such as moving averages, oscillators and support-resistance levels can be combined well with the Renko chart.

Entry Points Pro indicator MT4

The Entry Points Pro indicator is a specialized algorithm for the MT4 trading platform. You can use the considered algorithm to quickly assess the situation on the chart of the selected asset, as well as identify the optimal places to enter the market.

The basis of the algorithm under consideration is a unique computation system that is able to generate the most accurate signals for creating positions without delays and redrawing. The signals of the described algorithm themselves are displayed on the trading chart in the form of multidirectional arrows. Since such signals are extremely understandable, any beginner can successfully use the described algorithm.

The Entry Points Pro indicator, thanks to the unique calculation system that underlies it, gives accurate signals on any assets, including cryptocurrencies, as well as on any time intervals.

To download the Entry Points Pro indicator, use the link that you can see below.

Download the Entry Points Pro indicator

Entry Points Pro indicator. Optimization

The process of installing the described algorithm into the trading platform is extremely simple. To cope with this task, you do not need to have any knowledge or experience. To get acquainted with the settings of the considered algorithm, it is enough to transfer it to the chart of the selected asset.

indikator entry points pro

To successfully apply the algorithm in question, you will need to make changes to the following settings:

  1. “Max-size-of-signal-candle”. In this field, you can specify the number of candles that the considered algorithm will take into account in the process of performing all the necessary calculations.
  2. “Period-DEMA”. In this field you can set the period of the DEMA instrument, which is part of the described algorithm.
  3. Days-Statistics. This parameter allows you to select the number of days, statistics for which will be displayed in the information window of the described algorithm.
  4. Use-Alert. After activating this parameter, at the moment when the considered algorithm detects the next entry point to the market, you will hear a sound signal.

In fact, the considered algorithm has a large number of parameters, but for its successful application for making money, you should only make changes to those described above. Due to the fact that it is necessary to make changes in a small number of parameters that affect the correctness of its functioning, both an experienced speculator and a beginner who does not have any experience are able to cope with the optimization process.

Algorithm application

Using the described algorithm to generate income in the foreign exchange market is as simple as possible. You just need to transfer the Entry Points Pro indicator to the chart of the selected asset and perform the optimization procedure. Then you should wait for the next signal to appear and create a position in the desired direction.indikator entry points pro

As soon as a blue arrow pointing upwards appears on the trading chart, you need to quickly create a buy position. This deal should be closed only after an opposite signal appears on the trading chart. The moment a downward red arrow appears, you need to create a sell position. It is recommended to close this order only after the appearance of an opposite signal in the form of a blue arrow directed upwards.

The best option is to use the described algorithm together with additional technical tools as part of a particular trading strategy. To learn how to correctly optimize and apply the described algorithm, you should use a demo account.

Trend Bands indicator

The Trend Bands indicator is a specialized algorithm for the MT4 trading platform. With the help of this technical tool, you can quite easily assess the situation that has developed at the current time on the chart of the selected asset, as well as determine the right moments to enter the market.

The signals of the algorithm under consideration are displayed in the form of three lines that form the boundaries and the center of the price channel. To use such signals, no skills or experience are required, so this technical tool can be safely recommended to all beginners.

Since the signals of the Trend Bands indicator retain a fairly high level of accuracy on almost any currency pair and time frame, it can be called truly universal.

To download the Trend Bands indicator, use the link that you can see below.

Download Trend Bands indicator

Trend Bands indicator. Optimization

Almost any beginner can cope with the installation process of the described algorithm. The fact is that this task does not require any experience or skills. To get acquainted with the parameters of the described algorithm, you just need to transfer the described algorithm to the trading chart of the asset you have chosen to earn.indikator trend bands

The considered technical instrument has only one adjustable parameter, which is called “Period”. The value for this field should be selected depending on what time interval you plan to use for trading in order to generate income.

Due to the fact that the described algorithm has only one configurable parameter that affects the correctness of its functioning, the optimization process can be successfully handled not only by a speculator who has been trading Forex for several years, but also by a beginner who is just getting acquainted with the foreign exchange market.

Algorithm application

Using the described algorithm to generate income in the foreign exchange market is as simple as possible. You just need to transfer the Trend Bands indicator to the chart of the asset of your choice and perform the optimization procedure. At the next stage, you need to wait for the next signal to appear and create orders in the right direction.indikator trend bands

There are two options for using the described algorithm to make money on the foreign exchange market. The first option involves creating orders after the asset price bounces off the price channel. If the price bounces off the bottom of the channel, you should quickly create a buy position. The order must be closed at the moment the price crosses the center line.

When the price bounces off the upper edge of the price channel, you should create a sell position as quickly as possible. This trade must be closed immediately after the center line is crossed by the price. The second option for using this instrument involves opening orders after the price channel is broken. If the price breaks through the upper edge of the channel, you need to create a buy order. When the lower edge of the channel is broken, a sell position should be opened.

Theoretically, it is possible to open orders only after based on the signals of the considered algorithm, but this approach is rather risky. To make trading safer and increase the chances of getting a stable income, you should use this tool as part of a trading system. To learn how to correctly optimize and apply the tool in question, use a demo account.

TD Sequential Ultimate Indicator

The TD Sequential Ultimate indicator is a specialized algorithm for the MT5 trading platform. Using this technical tool, you can, with a fairly acceptable level of accuracy, assess the situation that has developed on the chart of the selected asset and identify the optimal places for creating successful positions.

The algorithm in question was developed on the basis of a technique created by the famous analyst T. DeMark. The signals of this technical instrument are displayed near the price level in the form of numbers and oppositely directed arrows. Since the signals in the form of arrows are as clear as possible and extremely simple to understand, the considered algorithm can be safely recommended to beginners who are just getting acquainted with the foreign exchange market.

Since the signals of the described algorithm retain an acceptable level of accuracy on almost any currency pairs and time intervals, it can be called truly universal. To download the TD Sequential Ultimate indicator, use the link that you can see below.

TD Sequential Ultimate indicator. Optimization

The very process of installing the considered algorithm is elementary. To cope with this task, you do not need any special skills or knowledge. As soon as you transfer the described algorithm to the chart of the selected asset, you can familiarize yourself with its parameters.

To successfully apply the described algorithm, you need to make changes to the following parameters:

  1. “Max-Bars”. This parameter is responsible for the number of bars from history that the described algorithm will take into account when performing all the necessary calculations.
  2. “Front-Size”. In this field, you can configure the size of the numbers that the described algorithm displays on the trading chart.
  3. Arrow-Width. This parameter is responsible for the size of the arrows that the considered algorithm will display on the screen.

Also, in the parameters of the described algorithm, you can adjust the shade of the numbers and arrows that the considered algorithm will display on the trading chart. In addition, you can activate the types of signals you need that you need to successfully use it. Since for the successful use of the algorithm under consideration, it is enough to make changes to only a few parameters, any beginner can handle the optimization process.

Algorithm application

The process of applying the described algorithm can be handled by a speculator with any amount of experience. You just need to transfer the TD Sequential Ultimate indicator to the chart of your chosen asset and optimize it. Then you should wait for the next signal and create a position in the desired direction.

As soon as a red arrow pointing downwards appears on the trading chart, you need to create a position in the desired direction. Only after the return signal appears on the screen, this deal must be closed.

At the moment when a green arrow directed upward appears on the trading chart, you should create a buy position. This order must be promptly closed after a return signal appears on the screen. The best option is to use the considered algorithm as part of a particular trading system together with additional technical tools. To gain skills and experience in applying the considered algorithm, it is recommended to use a demo account. You should start trading with real money after you learn how to use this technical tool correctly.

Arrow Trend Surfer indicator

The Arrow Trend Surfer indicator is a specialized algorithm for the MT4 trading platform. With the help of this algorithm, you can quickly analyze the situation that has developed on the chart of the selected asset in the period under consideration, as well as identify the optimal places to enter the market.

The described algorithm is a striking representative of arrow indicators, since it marks suitable places for creating successful positions with the help of multidirectional arrows. Such signals are extremely visual and easy to use. Thanks to this feature, any beginner can successfully use the described algorithm to make money on the foreign exchange market.

The Arrow Trend Surfer indicator is able to generate signals with an acceptable level of accuracy on almost any period of time and asset, but to achieve maximum efficiency, professional speculators recommend using it for periods of time up to H1.

To download the Arrow Trend Surfer indicator, use the link you can see below.

Download Arrow Trend Surfer Indicator

Arrow Trend Surfer indicator. Optimization

Almost any beginner can cope with the installation procedure of the described algorithm without much difficulty. This procedure is elementary and does not require the speculator to have any special skills or knowledge. To get acquainted with the parameters of the described algorithm, it is enough to transfer it to the trading chart of the asset of your choice.indikator arrow trend surfer

In setting up the algorithm in question, you can only change the shade of the arrows, which will mark the optimal places for creating buy and sell positions. The fact that the creators of the algorithm in question did not envisage the possibility of making changes to the parameters that affect the correct functioning, on the one hand excludes the possibility of receiving erroneous signals due to incorrect optimization, on the other hand, experienced speculators will not be able to fine-tune the algorithm under consideration for the one used. time span and asset.

Algorithm application

It is elementary to use the described algorithm to generate income in the foreign exchange market. You just need to open a trading chart of the asset that you plan to use to make money and transfer the Arrow Trend Surfer indicator to it. Then you just need to wait for the next signal to appear and create a position in the desired direction.indikator arrow trend surfer

The appearance of a downward-directed red arrow is a signal to create a sell position. The order you created must be kept open until it is displayed close to the price level of the return signal.

The moment a blue arrow pointing upward appears on the screen, you need to quickly create a buy position. This order should be closed as soon as possible after the return signal is displayed on the trading chart.

The Arrow Trend Surfer indicator, like any other arrow indicator, periodically produces erroneous signals, the use of which can lead to losses. To compensate for this drawback, you should combine the considered algorithm with additional tools, thereby creating your own trading strategy. To learn how to correctly optimize and correctly apply the described algorithm, it is recommended to use a demo account so as not to risk your deposit. You should start trading with real money only after using the described algorithm on a demo account gives a stable result.

Predicting the Trend Reversal by Stoch RSI

The Stochastic RSI indicator is an oscillator that uses RSI values as input. Tushar Chande and Stanley Krol had developed the indicator. StochRSI derives its value from RSI. This indicator helps measure whether the RSI’s current value is relative to its high/low range for the specified period.

What is Stoch RSI?

The stochastic formula is used to compare the close price of a stock with its range to predict the pivot point of the chart. This formula can help traders to determine whether the RSI is overbought or oversold. The StochRSI oscillator is a more sensitive indicator that can accommodate specific historical characteristics by using two momentum indicators simultaneously.

The Stoch RSI was developed and published by trading system assistant Tushar Chande and money management expert Stanley Kroll in his book “The New Technical Trader” in 1994. The idea behind this is to increase the sensitivity of triggering overbought and oversold signals.

According to technical traders, StochRSI oscillates between 20 and 80 for a more extended period without reaching the limit range. Unlike traditional momentum indicators where 70 and 30 indicate turning points, StochRSI uses 20 and 80 as overbought and oversold prices.

Traders may stay on the sidelines and try to trade based on oversold or overbought RSI levels. Most traders now regard StochRSI as an indispensable impulse oscillator.

How to calculate Stoch RSI?

StochRSI is established on RSI measurement. RSI has an input value of 14, which indicates how many data periods are used for calculation. These RSI values ​​are then used in the StochRSI formula.

StochRSI = (RSI – Lowest RSI)/Max RSI – Lowest RSI

  • Record RSI levels for 14 periods.
  • On the 14th period, record the current RSI reading, including the highest and the lowest RSI reading. Now you can enter all variables in the formula of StochRSI.
  • On the 15th period, note the current RSI reading, highest and the lowest reading, but only for the last 14 period (not the last 15). Calculate the new StochRSI.
  • At the end of each period, only the last 14 RSI values ​​are used to calculate the new StochRSI value.

How to use StochRSI effectively?

The most common use of StochRSI (StochRSI) is to create trading strategies to find value in overbought and oversold areas. StochRSI fluctuates between 0 and 100. Values ​​below 20 are oversold, and values ​​above 80 are overbought. The oversold indicator in the primary uptrend is bullish, while the overbought indicator in the primary downtrend is considered bearish.

However, the high volatility of StochRSI requires caution. Until the subsequent price movement confirms the change, transactions should not be based on overbought or oversold values. For example, overbought stocks in a downtrend should be seen as a warning of possible differences rather than a market entry signal. StochRSI should be below the midline 50 to confirm the continuation of the downtrend.

On the contrary, after the oversold value, StochRSI should rise above 50 in a stronger upward trend. However, the StochRSI value is still in the oversold or overbought area. It may indicate a trend reversal over a long time.

It is not commended to use StochRSI independently because it is a second-order indicator that is only two steps away from real-time price changes in the market. It is almost always best to wait for the rising or falling transition in the normal RSI zone and the confluence of the other trading indicators (such as MACD, OBV, candlesticks, etc.).

Stoch vs RSI, which is better and more useful?

Let’s compare both indicators to find out what’s better.

Stochastic Oscillator

George Lane developed the Stochastic Oscillator indicator to compare the close price of an asset with its price range over a period. Lane believes that prices are close to highs in an uptrend market and close to lows in a downtrend market. Like RSI, the random value is displayed in the range of 0 to 100. When the oscillator is higher than 80, it will create overbought conditions. When the value is below 20, the asset is considered oversold.

It consists of two lines: one represents the actual value of the oscillator for each period, and the other represents its three-day simple moving average. Since it is assumed that price follows momentum, the intersection of these two lines is considered to be a possible reversal because this indicates that momentum changes sharply from one day to the next.

RSI (Relative Strength Index)

J. Welles Wilder Jr. developed Relative Strength Index by comparing recent market gains and recent losses. Therefore, RSI is a momentum indicator that measures the degree of recent price changes to assess the overbought or oversold conditions of stocks or other asset prices.

RSI is usually displayed as an oscillator (a line chart moving between two extreme points) at the bottom of the chart and can be read from 0 to 100. The midpoint of the line is 50. If the RSI is higher than 70, the underlying security is considered to be overbought. Conversely, when the RSI is below 30, the asset is considered oversold. Traders also use RSI to identify support and resistance areas, identify possible reversal divergence, and confirm signals from other indicators.

Difference Between Relative Strength Index (RSI) and Stochastic Oscillator.

Relative Strength Index (RSI) and Stochastic Oscillator are price impulse oscillators and are widely used in technical analysis. Although they are often used together, they each have different theories and methods. The stochastic oscillator is based on the assumption that the closing price should close in the same direction as the current trend.

At the same time, RSI measures overbought and oversold levels by measuring the speed of price movement. In other words, RSI is designed to measure the speed of price movement, and the Stochastic Oscillator formula works best in the constant trading area.

Although the relative strength index is designed to measure the speed of price movement, the stochastic oscillator formula is most effective when the market is trading within a constant range. RSI is more useful in trending markets, while stochastic indicators are more useful in sideways or volatile markets.

Limitations of Using the Stochastic RSI

StochRSI tends to be more unstable. To control the downside, you need to smooth it. This can be achieved by moving averages. The average price is displayed as representing each cycle on the chart, and these points are connected to form a flexible line that changes with the price bar.

In this way, the moving average helps to stabilize price fluctuations, thereby reducing market noise. Smoothing depends on the number of averaging periods to achieve better trend recognition.