StochRSI is the abbreviation for the Stochastic relative strength index, and it consists of two indicators. It comprises all the best from them and is based on their calculation formulas. You can buy the Call binary options only when the indicator’s line crosses the level of 20 from down to up. Also, this type of option can be also bought if the line crosses the centre line from down to up too. As for the Put options, it is recommended to buy them only if the indicator’s line crosses the zone of 80 from up to down. Also, a trader can buy this option if the line crosses the central line from up to down.
The Stochastic relative strength binary options’ indicator consists of two auxiliary tools, which were considered by us earlier. It consists of the Stochastic and the Elder’s Force Index. As we already know, the Stochastic is the classic oscillator that became very popular. When this binary options’ indicator is calculated, both closing levels and extreme points, which are attained by the price on the particular time stages, are taken into account. Currently, this indicator turns out to be the smoothed version of the oscillator with two lines on a chart.
As for the Force Index binary options’ indicator, which is also used within the hybrid StochRSI indicator, it shows the force of the market, in other words, the force of the current market movement. When this indicator stays in the zone above 80, it is considered that the financial tool is overbought. If it is located lower than 20, the financial tool is considered the oversold one. However, practically, it turns out that the Force Index binary options’ indicator doesn’t send signals for trading very frequently. In other words, it exceeds the bounds of 20 and 80 rarely.
For this reason, the StochRSI binary options’ indicator appeared in the 1994, and it has incorporated all the best from two predecessors. This indicator is based on the calculation of two indicators that are included in it. As for the trading signals, sent by the Stochastic relative strength index binary options’ indicator, they can be the following. If the line of the auxiliary tool gets to the range between 20 and 80 from up to down, the signal that the market changes its trend from the ascending one to the descending one will appear. On the other hand, when the line of the binary options’ indicator gets to the range from down to up, the signal that the ascending trend in the market begins to prevail appears.
As for the binary options’ trading with this indicator, it is needed to follow the appearing signals carefully. The Put binary options have to be bought only when the sellers begin to prevail in the market. As for the Call options’ purchase, it can be carried out only when the buyers dominate in the market. In other words, if the indicator’s line is located lower than 80, you have to buy the Put options. And if it is located higher than 20, the Call options have to be bought.
The signals also appear when the centre line of the Stochastic relative strength index is crossed. If the line of this auxiliary tool crosses the centre line from down to up, it is recommended to buy the Call options. And when the line of the binary options’ indicator crosses the centre line from up to down, it is recommended to buy the Put options.
However, the Stochastic relative strength index, as well as its components, can work only during the sideways movement in the market. When the stable trend begins, the indicator can stay in the overbought or oversold zones for a pretty long time. In this situation, it will send the false signals.