On This Page
Key Takeaways
- Stochastic RSI applies the stochastic oscillator formula to RSI readings rather than to price, so it is an indicator built on top of another indicator.
- It was developed by Tushar Chande and Stanley Kroll and introduced in their 1994 book The New Technical Trader.
- The raw ratio spans 0 to 1 when the RSI window has a positive range. Multiplying by 100 gives a 0-to-100 display with conventional 80/20 reference bands.
- A raw value of 100 places current RSI at its window high; zero places it at its window low. The RSI level itself remains a separate measurement.
- Match the RSI length, stochastic lookback, output scale and smoothing before you compare charts; each one moves the line and its crossovers.
What is Stochastic RSI (StochRSI)?
Stochastic RSI (StochRSI) is a momentum oscillator that applies the stochastic range-position formula to RSI readings instead of price. It measures where current RSI sits between the highest and lowest RSI values in its lookback window, on a 0-to-100 or 0-to-1 scale, so it is an indicator built on top of another indicator.
The raw 0-to-100 value is 100 × (current RSI − lowest RSI) / (highest RSI − lowest RSI). Tushar Chande and Stanley Kroll introduced the indicator in The New Technical Trader.
Formula
StochRSI = [(Current RSI − Lowest RSI over N periods) / (Highest RSI over N periods − Lowest RSI over N periods)] × 100- Current RSI is the latest Relative Strength Index value; 14 periods is the common RSI length.
- N is the stochastic lookback applied to the RSI series.
- Use either a 0-to-1 scale with 0.8/0.2 levels or a 0-to-100 scale with 80/20 levels. Keep thresholds consistent with the display.
- A common 14/14/3/3 setup uses Wilder RSI(14), a 14-reading stochastic range, a three-period SMA of the raw ratio for %K, and a three-period SMA of %K for %D. Match those settings before comparing two charts.
Stochastic RSI example
A 14-period Stochastic RSI reads a stock whose current 14-period RSI is 60. Over the last 14 RSI values, the lowest RSI was 40 and the highest was 80.
- Range of recent RSI: 80 − 40 = 40 points
- StochRSI = [(60 − 40) / 40] × 100 = 0.50 × 100 = 50
- RSI later climbs to 78 with the same 40 to 80 range: [(78 − 40) / 40] × 100 = 95
With the range fixed at 40 to 80, each RSI point changes raw StochRSI by 100 / 40 = 2.5 points. RSI rising from 60 to 78 therefore lifts raw StochRSI from 50 to 95.
If RSI rises to 78 while those endpoints remain in the window, raw StochRSI becomes 95. The fixed 40-point denominator gives 2.5 oscillator points per RSI point, so the 18-point RSI change produces a 45-point change in StochRSI.
The range endpoints update as readings enter and leave the window, so a new RSI high or low resets the scale.
Stochastic RSI vs RSI: range position and RSI level
Raw StochRSI of 100 means current RSI is at its window high; zero means it is at the window low.
An RSI of 40 produces StochRSI of 100 when the window runs from 20 to 40. Read the RSI level and its range position as two separate measurements.
In the 14/14 chart, bar 2 has RSI of 56.17 and raw StochRSI of 100. Bar 9 has RSI of 47.08 and raw StochRSI of zero, with RSI near the middle of its own scale.
Stochastic RSI settings: raw line, %K and %D
A common 14/14/3/3 configuration smooths the raw 14/14 reading with a three-period SMA to produce %K, then applies another three-period SMA for %D. The chart plots the raw line, before either smoothing stage.
Raw readings lie between zero and 100, and SMA smoothing keeps that range, so the 80/20 bands read the same on the raw line, %K and %D.
Some charts use a 0-to-1 scale. Match 0.8/0.2 thresholds to that scale and 80/20 thresholds to the 0-to-100 scale.
Stochastic RSI signals: thresholds, crossovers and divergence
Pick a trigger: a threshold crossing, a %K/%D crossing or a price divergence. Set the line, settings, decision bar, entry and exit before the event, and read it against the price trend and nearby swing levels.
StochRSI turns faster than RSI, so give the trade a near target date in the Options Profit Calculator and pick the structure with the strongest payoff at the target by that date.
Limitations of Stochastic RSI
- StochRSI measures RSI’s position within its own recent range. An RSI of 40 reads 100 when 40 is the window high, so check the RSI level before calling the move overbought.
- A narrow RSI range makes the line jumpy. A 40-point range moves raw StochRSI 2.5 points per RSI point, and a 10-point range moves it 10, so a 10-point RSI move carries the raw line from zero to 100. Trade threshold crossings on the smoothed %K.
- In a strong trend the line pins near 100 in a rally, or near zero in a decline, while the trend continues. A reading at the window high marks position; wait for the line to turn back through 80 before you fade the trend.
- RSI length, stochastic lookback, smoothing and scale all move the line and its crossings. Match all four before you compare signals across charts.
Bottom line
Stochastic RSI shows where RSI sits within its own recent range, which makes it faster and choppier than RSI itself. State the RSI length, lookback, smoothing and scale, read the RSI level and the range position as separate measurements, and confirm threshold or crossover events with the price trend and nearby swing levels.
Clear answers
Frequently Asked Questions
Sources and Further Reading
How entries are sourced, calculated and updated: editorial methodology.