Technical Analysis

Indicator StochRSI

The technical indicator StochRSI is a hybrid of two other indicators, Stochastics and the Relative Strength Index (RSI). The StochRSI indicator took the best of these two indicators, so that it allows to determine with even greater accuracy the periods during which the analyzed active is overbought or oversold.

The creators of this indicator are Stanley Kroll and Tushar Chande. For the first time the description of the indicator StochRSI appeared in 1994 in the book of these authors, which is called the “New Technical Trader”. In this book authors talk about one feature of the RSI. The fact is that there are times in the market when RSI trades between 30% and 70% for a long time. This can last long enough, and overbuying or overselling levels will not be achieved.

As a result, traders who expect to open a position, based on the indicator values ​​for overbuying/overselling zones cannot enter the market for a long time, because they simply

do not receive the entry point. The StochRSI hybrid indicator has been designed specifically to increase sensitivity, and to be able to determine more accurately where the overbuying/ overselling levels are.

Stanley Kroll

Stanley Kroll, one of the most respected futures traders, built his success on steel patience. In the drawer of his desk Kroll kept an extract from the book by Edwin Lefevre “Memoirs of the Exchange Speculator.” In particular, you can read: “Having spent many years on Wall Street and having made and lost millions of dollars, I want to tell you this: I never made a lot of money from my mind. It was always in my patience. Do you understand? It was in my ability to sit and wait.”

This was Kroll’s key to success – no matter what happened, he adhered to his convictions and did not panic. If he began getting nervous, he took a vacation and left for Europe or a long cruise on his yacht, just to stay away from the market and not act recklessly.

Kroll started his career at Merrill Lynch in the late 1950s. In the early years, he was never able to accumulate special capital, but had many theories, so he decided to check them and in 1967 founded the firm “Kroll, Dallon and Company”. After a period of successful work, he retired in 1975 for five years. His next unexpected move took place in 1985, when he set up an office on a 54-foot yacht equipped with communication facilities, which allowed him to trade from anywhere.

Not only the time required to get to work was reduced to a few seconds, but he himself loved solitude. “After all,” he wrote, “what can be more peaceful and conducive to clear thinking than a comfortable yacht moored (most of the time) to some very strong pier and piles?”

For Kroll, this concentration meant tracking every futures deal in which he was interested. His office staff was not allowed to talk to him during the trading session, and any communication was done using gestures. Kroll’s decisions about buying and selling were based solely on market movements and nothing else, because he believed that too many so-called facts were unreliable.

“Take cocoa, for example,” Kroll said, “Almost all of it grows in Ghana and Nigeria. The information coming from these two countries is released by their cocoa marketing departments that are what they seem to be – the tools to get the best price for their cocoa producers – that is, it is a source of information, as impartial and accurate as TASS.” In the essay “How to win a lot and lose a little” Kroll explains why trading commodity futures is partly a science, and partly an art.


Setting the indicator


To configure the indicators, you should enter a separate window of the Technical Analysis on the Olymp Trade platform. The indicators are located in the section Oscillators when you select “Indicators form” in the Indicators tab:

Indicator settings (periods) should be left standard – 14 and 9.

Use StochRSI indicator in practice!

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