Stochastic RSI Indicator
Platform: MT4 Type: Oscillator Last update: September 30, 2024The Stochastic RSI Indicator (Stoch RSI) was developed to increase the sensitivity and reliability of the regular RSI indicator when it comes to trading off overbought/oversold RSI levels. In other words, it is used in forex technical analysis to provide a stochastic calculation to the RSI indicator. Of course, it is an oscillator and it calculates values between 0 and 100. That Stochastic RSI forex gauge simply provides better and more distinctive signals to trade upon.
Trading with the stochastic rsi indicator
As we explained earlier, the Stochastic RSI Indicator is a combination of RSI with Stochastic giving improved results. Notice, that unlike with traditional RSI, where we used 30 and 70 levels as oversold/overbought levels, here we use 20 and 80, same as for Stochastic indicator. Now, let’s take a look on how to use it.
Buy Signal
Follow these steps for a long trade:
- The overall trend should be bullish
- The Stoch RSI leaves oversold area (below 20)
- Buy trade is triggered after the above conditions are met
- Set stop loss a few pips below the last low point of the market
- Take profit or exit trade whenever the Stoch RSI reaches overbought level or use your own preffered method of trade exit
Sell Signal
Follow these steps for a short trade:
- The overall trend should be bearish
- The Stoch RSI leaves overbought area (above 80)
- Sell trade is triggered after the above conditions are met
- Set stop loss a few pips above the last high point of the market
- Take profit or exit trade whenever the Stoch RSI reaches oversold level or use your own preffered method of trade exit
