StochRSI Indicator In Forex And Beyond

http://www.guerillastocktrading.com/technical-analysis/what-is-your-macd-fast... The StochRSI indicator was produced by stock investors. The StochRSI indicator in Forex is the exact same indicator. The point that Forex traders have lent this tool from stock investors actually testifies to the accuracy and reliability of the technical analysis tool.

Designed by Tushard Chande and Stanley Kroll, StochRSI is an oscillator that calculates the level of RSI in accordance with its range for a set time frame. StochRSI applies the Stochastics formula to RSI figures, instead of price values. That causes it to be an indicator of an indicator. The end result is an oscillator that fluctuates between 0 and 1.

Within their 1994 book, The New Technical Trader, Kroll and Chande, demonstrate that RSI can oscillate between 80 and 20 for longer periods without attaining extreme levels. Notice that 80 and 20 are used for overbought and oversold rather than the classical 70 and 30. Traders expecting to enter a stock according to an overbought or oversold reading in RSI may well find themselves constantly on the sidelines. Tushard Chande and Stanley Kroll, created StochRSI to improve sensitivity and generate additional overbought and oversold signals.

The StochRSI works best in a trading market, not a trending market. A trading market can be recognized by the prepared eye as possessing wonderful swing highs to swing lows and quite often trading channels. A more objective approach to ascertain if a market is trending or trading is to consider the ADX indicator.

When the ADX line is climbing, a market is trending. If the ADX line is falling, a market is trading.

To help make the StochRSI work you want the ADX line to be dropping. That drastically raises the accuracy and reliability of this indicator.

In this video clip, I apply the StochRSI to the chart of the S&P 500. What most traders might not know is that the S&P 500 transitioned from a trending market right into a trading market back on June 14 2010. This means the StochRSI ought to be within your toolbox of weaponry for trading.

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[bebigeli]

Hi Lance, how is the Middle ADX line calculated? Is that a simple moving average?

[StockTradingMaster]

@bebigeli Hey bud, ADXi = [(ADX(i-1) * (n - 1)) + DXi] / n. Where DX is DX = [ 100 * ABS( (+DI) - (-DI) ) ] / ( (+DI) + (-DI) ) When the middle line moves up stocks are trending so your trend indicators work better and when the line moves down stocks are trading so your trading indicators (stochastics, etc.) work better.

[alabader741]

show us more back test plz !

[StockTradingMaster]

@alabader741 Tell you what. You do a video with backtesting the StochRSI then reply to this video and I'll screen it and improve it if it's good enough.

[joram1963]

I'm afraid I don't agree with you.

Accum/Dist is rolling over, ADX is rolling over, so the market is going to change from trading to trending lower. I believe that the market is going to crash soon.

[StockTradingMaster]

@joram1963 Your challenge is to over ride your own thoughts and really listen to what is being said. This is not a S&P 500 forecast video. I'm working on one for next week now. This is an intro to the StochRSI only. So this "I'm afraid I don't agree with you" is dumb. I'm left scratching my head saying what is this bloke talking about? The S&P 500 is in a downtrend and I believe it is going lower next week and that the ADX line will start to trend higher as we move into a downtrending market.

[sublimeforexchampion]

thanks...

[StockTradingMaster]

@joram1963 Ohhhhhhh... I understand where you are coming from and no, I'm the one who is sorry about creating the confusion. I need to be more careful about what I say. I see what you mean about how that can be taken a completely different way. Put that smiley face back on, this was my bad. BTW: ETA on my S&P 500 technical analysis video is about 1 hour from now.

[joram1963]

@StockTradingMaster

You said at the end: >>…so now you going to take another long entry<< I didn’t agreed with this . . .

[joram1963]

@StockTradingMaster

OK, sorry, you are right, I thought it is a S&P 500 forecast video . . . :o(