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StochRSI and DTosc

StochRSI is an oscillator based on RSI, created by Tushar Chande and Stanley Kroll. Actually StochRSI ‘is an indicator of an indicator’. StochRSI aims to increase the sensitivity of RSI readings and generate more trading signals than the common RSI.

Utility: Identifying Overbought / Oversold Levels

Standard Settings: RSI (14) periods

 

StochRSI Calculation

■ StochRSI = (RSI - Lowest Low RSI) / (Highest High RSI - Lowest Low RSI)

StochRSI measures the level of RSI compared to its high-low range and fluctuates between the values zero (0) and one (1).

 

RSI

StochRSI

Overbought

Above 70

Above 0.8

Oversold

Below 30

Below 0.2

The StockRSI centerline is at value = .50. When StochRSI is above 0.50, it reflects an uptrend. When StockRSIis is below 0.50, it reflects a downtrend.

 

StochRSI Interpretation

For RSI=14 periods, here are some interpretations for StochRSI::

  • StochRSI = 0 {RSI is at its lowest point for 14 days}
  • StochRSI = 1 {RSI is at its highest point for 14 days}
  • StochRSI = .5 {RSI is in the middle of its 14-day high-low range}
  • StochRSI = .2 {RSI is near the low of its 14-day high-low range}
  • StochRSI = .80 {RSI is near the high of its 14-day high-low range}

 

StochRSI Buy and Sell Signals

StochRSI Buy Signals

Buy signals occur when the StochRSI crosses above the Oversold Line Level (20).

StochRSI Sell Signals

Sell signals occur when the StochRSI crosses below the Overbought Line Level (80).

Smoothing the Results of StockRSI

As StochRSI is higly volatile, the use of a short-term moving average can smooth the results. A 10-day Simple Moving Average (SMA) of StockRSI can highlight the direction of the master trend, here is how:

■ 10-day SMA of StochRSI above .50 then UPTREND

■ 10-day SMA of StochRSI below .50 then DOWNTREND

Multi-Timeframe Confirmation

Multiple timeframes may be used to confirm the signals produced by StochRSI, as follows:

  • M15 signals on H1 timeframe (intraday signals)
  • D1 signals on W1 timeframe (swing signals)
  • W1 signals on M1 timeframe (long-term signals)

The larger timeframe is used for pointing the direction of the trade and the smaller timeframe for triggering the trade.

MT4 Trade Signals Generator

StockRSI Conclusions

StochRSI produces a greater number of signals than the original RSI. As this oscillator is highly volatile it should be combined with another technical analysis tool for confirmation. StockRSI trading signals could be confirmed also using Price-Pattern Recognition, Breakouts, Volatility-based Indicators, etc..

Chart: StochRSI vs DTosc

StochRSI and DTosc on EURUSD

 

DTosc Oscillator Based on StockRSI

DTosc is another oscillator based on StockRSI, developed by Robert Miner. It is designed to identify price waves and generate trading signals.

DTosc Settings

  • The four (4) values incurred on DTosc correspond to: {PeriodRSI, PeriodStoch, PeriodSK and PeriodSD}
  • The standard settings for DTosc is: 13,8,5,3
  • Other settings for DTosc are: (8,5,3,3), (21,13,8,8), (34,21,13,13)

 

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StochRSI and DTosc

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