Stock market glossary

Stochastic RSI

The stochastic RSI applies the stochastic formula to the RSI instead of the price: it shows where the RSI sits relative to its recent values and is much more responsive.

It was proposed by Tushar Chande and Stanley Kroll in 1994. Since the RSI often stays between 30 and 70 for a long time, the stochastic RSI "stretches" it over a 0-100 scale and flags extremes sooner. The most used fast version has parameters 3, 3, 14, 14.

How it's calculated

You calculate the 14-period RSI; then stochastic RSI = (RSI − lowest RSI over the last 14 periods) / (highest − lowest RSI over the last 14 periods) × 100. %K is the 3-period average of this value, %D the 3-period average of %K.

Worked example

Today the RSI is 62; over the last 14 periods its low was 40 and its high 70. The stochastic RSI is (62 − 40) / (70 − 40) × 100 = 22 / 30 × 100 = 73.3.

How to read it

Above 80 the indicator signals overbought, below 20 oversold. It's very sensitive and gives many signals: it's best used together with a trend indicator.

💡 On Fanta-Trade you'll find this indicator calculated for every stock, over one week, one month, three months and one year, in the "Technical indicators" section of the stock page.

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