Stochastic RSI or Stoch RSI is a derivative of Relative Strength Index (RSI) is a momentum oscillator type of technical indicator. It oscillates between 0-100 values. RSI values closer to 0 indicates oversold market conditions, while values closer to 100 indicates overbought.
Stoch RSI values (red and blue lines) closer to 0 indicates overbought market conditions while values closer to 100 indicates oversold. Thresholds (yellow band) are usually assigned to Stoch RSI values, anything below 20 indicates sold, while above 80 can indicate overbought. For time period and trading intervals, lower thresholds may be used as a measure to reduce market noise or to produce a more confident signal.
RSI = 100 – 100/ (1 + RS)RS = Average Gain of n days UP / Average Loss of n days DOWNStoch RSI = (RSI - Lowest Low RSI) / (Highest High RSI - Lowest Low RSI)Where:n = Time Period