Stoch Rsi Indicator for MT4/MT5 : Download FREE

The Stoch RSI indicator, also known as Stochastic RSI, is crucial for technical analysis in the MT4 trading indicator framework. It falls under the momentum oscillator category and combines the Stochastic Oscillator and the Relative Strength Index (RSI) indicator. Traders often choose Stoch RSI for MT5 technical analysis. It provides a detailed view of the current market conditions for an asset. In simpler terms, it helps traders figure out if an asset is overbought or oversold. This guide explains the vital aspects of the Stoch RSI indicator, which is useful for MetaTrader 4 and 5.

Stoch Rsi Indicator FAQ

Youtube video Guide

What is the Stoch RSI Indicator?

The Stoch-RSI, a momentum oscillator indicator for Metatrader, tells if an asset is overbought or oversold. It combines a stochastic oscillator and a relative strength index to produce results. As a top-notch momentum oscillator, it helps traders spot overbought and oversold assets. This aids in deciding when to enter, leave, or hold a position. Tushar Chande and Stanley Kroll created the indicator. They first shared it in their 1994 book, “The new technical trader”. The highly sensitive Stoch-RSI relies on past performance and uses two momentum indicators at the same time.

Stoch-RSI indicator explanation graph

Indicator Formula

The Stoch-RSI indicator is calculated by subtracting the “Min (RSI)” values from the current RSI values and then dividing the result by the difference between the minimum and maximum RSI values.

Please note that this formula is for the %K line. And that the %D line is a moving average off the %K Line.

Mathematical formula for the Stoch-RSI indicator

How does it work?

Using a blend of the stochastic oscillator and the relative strength index, the Stoch-RSI indicator gets developed. It exhibits two lines – %K and %D – that move between, above, or below two alert lines. The top line, marking the overbought level, is set to 0.8 or 80, while the bottom line, indicating the oversold level, stands at 0.2 or 20. The %K line, usually shown in blue, represents the current RSI value in relation to the recent RSI range, typically over 14 days. On the other hand, the %D line, generally displayed in red, represents a moving average of the RSI values, serving to smooth out fluctuations. Although typically set to 14 days, users can adjust the period lookback. Similarly, users can customize the colors of the %K and %D lines to their preference.

Please note that the 2 lines ranges between 0 and 1 or 0 and 100. And that the Stoch-RSI indicator is just a derivative of the RSI which was merged with the stochastic oscillator.

thermore, reading the Stoch-RSI Indicator is quite similar to the interpretation of the stochastic oscillator:

 

  • Overbought: when the %K line crosses above the overbought line (80 per default) then drops below the %D line. It’s generally a signal to sell the asset or go short on it as its price is probably going to drop.
  • Oversold: when the %K line crosses below the oversold line (20 per default) then goes above the %D line. It’s generally interpreted as a signal to buy or go long on the asset as the price is predicted to rise.
Stoch-RSI chart showcasing overbought and oversold examples

Trading example

Stoch RSI Indicator for MT5 is built upon the Stoch-RSI indicator MT4 structure.  The following example is a chart taken from MetaTrader 5 that displays the Euro vs USD in a 1 Minute timeframe. Point A shows that the %K line (in blue) went above the overbought line. And then crossed below the %D line, which indicates a potential downtrend.

Furthermore, the downtrend occurred but it was short, a short position could have generated a respectable amount in the short term.

However, point B signaled a potential reversal, meaning, an uptrend. In fact, the %K line went below the oversold line and then had risen above the %D line (which is in red) which indicated an uptrend.

You can download Stoch Rsi indicator for Metatrader 5 via Finansya App.

Snapshot featuring the Stoch-RSI indicator on MT5 platform

Conclusion

The Stoch RSI Indicator serves as a potent tool in momentum trading, aiding in the accurate identification of overbought or oversold asset conditions. This powerful indicator derives from a fusion of the Relative Strength Index (RSI) and the Stochastic Oscillator.

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