StochRSI applies the Stochastics formula to RSI values instead of price values. In their 1994 book,The New Technical Trader, Chande and Kroll explain that RSI can oscillate between 80 and 20 for extended periods without reaching extreme levels. Traders looking to enter a stock based on an overbought or oversold reading in RSI might find themselves continuously on the sidelines. Chande and Kroll developedStochRSIto increase sensitivity and generate more overbought/oversold signals.

Trades should be placed when the indicator changes direction. You also can also plot a moving average of the TRIX to create a "signal" line (similar to the MACD indicator) and then buy when the TRIX rises above its signal line, and sell when it falls below its signal line.


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