Stochastic RSI on a Live Gold Chart

What it shows

K and D share a pane scaled 0 to 100, D being a 3-candle average of K, with guide lines at 80, 50 and 20. Expect both lines to spend long spells pinned to the top or bottom.

How Pravex works it out

1. Work out the RSI of the chosen source over the Candles in the RSI setting, the Wilder way: averages of up and down closes, then 100 − 100 ÷ (1 + up ÷ down).
2. Treat that RSI series like a price series. Over the high-low window find its highest and lowest value, then raw = 100 × (RSI − lowest RSI) ÷ (highest RSI − lowest RSI). If the RSI was flat across the whole window there is no value.
3. K is a simple average of the raw value over the K setting, 3 by default.
4. D is a simple average of K over the D setting, 3 by default.

Settings

Setting	Default	What changing it does
K averaging	3	How many raw values are averaged to get K. At 1 you see the raw value; higher numbers calm the line.
D averaging	3	How many K values are averaged to get D. A bigger number makes D slower.
Candles in the RSI	14	How many candles the RSI covers before it is stretched into the 0 to 100 range. Shorter lengths make the RSI itself jumpier.
High-low window	14	How many RSI readings the highest and lowest are taken from. A shorter window sends the line to the edges more often.
Source	close	The price the RSI underneath is built from. Changing it reshapes the RSI first and the stretch second.

How traders read it

A reading near 100 says the RSI is at its highest of the last 14 candles; near 0, at its lowest. Because it compares the RSI with itself, it moves fast and flips often. Traders use it to time pullbacks inside a trend they already see on the price chart.

The K and D crossing is the common trigger. K crossing above D low in the pane shows the RSI turning up from its recent floor; the mirror case near the top shows it rolling over.

The 80 and 20 lines mean stretched here too, but in a narrower sense. Here that means the RSI is stretched against its own recent range, which is a different thing from the RSI sitting above 70.

When it misleads

Two layers of maths on top of price make this the twitchiest line in the group. It can jump from 0 to 100 in a few candles, and on short gold timeframes it sits at an edge for long stretches whenever price trends. A flat RSI window gives no value at all. Crosses are plentiful and most are noise, so it needs the trend on a higher timeframe beside it.

Questions and answers

What is the difference between RSI and Stochastic RSI?

RSI measures up moves against down moves. Stochastic RSI takes that RSI and shows where it sits between its own lowest and highest value over the last 14 candles, so it reaches 0 and 100 much more often.

Why does Stochastic RSI hit 0 and 100 so often?

It rescales the RSI to its own recent range, so the lowest RSI of the window reads 0 and the highest reads 100 no matter how small the RSI range was.

Can I make Stochastic RSI less twitchy?

Raise K averaging from 3 to 5 or so (an example), or lengthen the high-low window. Both slow the line, and the edges get reached less often. Pravex starts at 14 for the RSI and the window and 3 for K and D.

Why does Stochastic RSI show 0 while the RSI is at 45?

A 0 only says the RSI is at its lowest of the last 14 readings. If the RSI has drifted from 60 down to 45, that 45 is the floor of its window, so the stretch reads 0 even though the RSI itself is close to the middle.

Related: Relative Strength Index, Stochastic, Moving Average Convergence Divergence, Williams Percent Range, every indicator.