What Is Stochastic RSI (StochRSI)

The Stochastic RSI (StochRSI) is an indicator used in technical analysis that ranges between zero and one (or zero and 100 on some charting platforms) and is created by applying the Stochastic oscillator formula to a set of relative strength index (RSI) values rather than to standard price data. Using RSI values within the Stochastic formula gives traders an idea of whether the current RSI value is overbought or oversold. 

Stochastic RSI (StochRSI) Indicator

The StochRSI is a momentum indicator developed to take advantage of both momentum indicators to create a more sensitive indicator. The new indicator would be tuned to a financial asset’s historical performance rather than a generalised analysis of price change.

How To Calculate Stochastic RSI (StochRSI)

Formula:- Stoch RSI = [RSI – min(RSI)]/[max(RSI) – min(RSI)]

Why Use Stochastic RSI (StochRSI)

While multiple indicators were already being used to show overbought and oversold levels, StockRSI was developed to improve the sensitivity of the indicator and generate more signals that traditional indicators. Apart from identifying overbought/oversold conditions, the StochRSI indicator can also be used to identify short-term trends by analysing it in the context of an oscillator.

How to Use The Stochastic RSI (StochRSI) Trading Strategy

Bullish Scenario:- When the value of Stoch RSI increases, it indicates the prices are going up, and when the value reaches around 0.8, it s considered an overbought condition.

Bearish Scenario:- When the value of Stoch RSI decreases, it indicates the prices are going down, and when the value reaches around 0.2, it s considered an oversold condition.

Building The Stochastic RSI (StochRSI) Trading Strategy in Mudrex

Strategy:- 

BUY:- Fast(K) Cup 0.8: RSI length(14) Stochastic Length(14) Fast MA(5) Slow MA(3)

SELL:- Fast(K) Cdown 0.3: RSI length(14) Stochastic Length(14) Fast MA(5) Slow MA(3)

TIME FRAME:- 4Hrs

Creating on Mudrex:- 

We will use 2 Stoch RSI indicator blocks. One for selling and One for buying.

For buying, we will use the following settings:-

For selling, we will use the following settings:-

Final Strategy:-

Testing:- 

Running on Binance Futures: BTC/USDT with tick interval of 4H yielded an overall profit of 367.83%

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