Indicator StochRSI

Indicator StochRSI - OlympTrade
Indicator StochRSI – OlympTrade

The StochRSI technical indicator is a combination of two other indicators, the Stochastics indicator and the RSI (Relative Strength Index). This indicator took the best of those indicators, and it allows traders to determine the times during which an asset is oversold or overbought with even greater accuracy.

Tushar Chande and Stanley Kroll created the StochRSI indicator, and it was first described in their book “The New Technical Trader” in 1994. The authors mainly discuss one specific feature of the RSI in the book. An asset may at times trade with a RSI from 30% to 70% for a very long time. If this scenario happens for long enough, overselling and overbuying levels won’t be achieved.

This results in traders wanting to open a position based on the indicator values ​​for overselling or overbuying zones not being able to do so for a long time, simply because they don’t receive an entry point. The StochRSI indicator has therefore been created to increase sensitivity, and this results in overselling and overbuying levels being determined more accurately.

A much respected futures traders, Stanley Kroll, built his success on endless patience. Kroll kept a passage of the book “Memoirs of the Exchange Speculator” by Edwin Lefevre in a drawer of his desk. The passage states that despite spending many years on Wall Street and making and losing millions of dollars, money was never made with his mind, but rather from his patience, his ability to sit and wait.

Kroll’s key to success was his ability to stick to his convictions and not to panic, no matter what happened. Whenever he felt he started feeling nervous, he went on vacation, spending days and weeks on his yacht or travelling all around Europe, to make sure he stayed away from the markets and not make thoughtless decisions.

In the late 1950s, Kroll began his career at Merrill Lynch. Earlier on, he didn’t manage to accumulate special capital, although he had many theories. He therefore decided to check the theories and founded the company “Kroll, Dallon and Company” in 1967. After a work successfully for a number of years, he retired for five years in 1975. In 1985, he made an unexpected move by setting up his office on a 54-foot yacht equipped with communication facilities. This gave him the freedom to be able to trade from anywhere in the world.

Not only was the time needed for him to get to work reduced to mere seconds, but he also loved solitude. He wrote that for him there was nothing more peaceful and conducive to clear thinking than a comfortable yacht that was moored to a strong pier most of the time.

Kroll traded by tracking all futures deals that interested him. During his trading sessions, his office staff were not permitted to talk to him, and all communications was done with gestures. Kroll based his buying and selling decisions only on market movements and nothing else, as he felt that much information that was labelled as facts was in fact not reliable.

Kroll uses cocoa as an example. As most of it grows in Nigeria and Ghana, the information provided by those two countries and released by their cocoa marketing departments are factual. These are their tools to obtain the best price for the cocoa producers. As such, these sources of information are as accurate and impartial as TASS. Kroll also refers to trading commodity futures as being partly an art and partly a science.

Configuring the indicator

The indicators should be configured in a separate Technical Analysis window on Olymp Trade’s platform. The indicator can be found in the Oscillators section after “Indicators form” has been selected in the Indicators tab:

Setting the indicator StochRSI on OlympTrade
Setting the indicator StochRSI on OlympTrade

Indicator periods should be left at the default settings of 9 and 14.

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