Enter into a Trade by using Stochastic RSI for Beginners #stochasticrsi #trading #usingindicator

Stochastic RSI indicator:
The Stochastic RSI indicator is an oscillator that measures the speed and momentum of price action by combining the attributes of a conventional Stochastic indicator and the Relative Strength Index (RSI) indicator. It ranges between zero and one (or zero and 100 on some charting platforms) and is created by applying the Stochastic oscillator formula to a set of RSI values rather than to standard price data. Using RSI values within the Stochastic formula gives traders an idea of whether the current RSI value is overbought or oversold.
The Stochastic RSI indicator can be used in trading strategies in various ways, such as:

Identifying overbought and oversold conditions:
A StochRSI reading above 0.8 (or 80) is considered overbought, while a reading below 0.2 (or 20) is considered oversold1. These levels indicate that the RSI is near the extremes of its recent readings and may be due for a reversal.

Divergence trading:
StochRSI can also identify divergences between the indicator and price. A divergence occurs when the price and the indicator move in opposite directions, signaling a potential trend change. For example, a bullish divergence occurs when the price makes a lower low, but the StochRSI makes a higher low. This suggests that the downward momentum is weakening and the price may reverse higher.

Trading crossovers:
StochRSI can also be used to identify crossovers between the indicator and a signal line. A signal line is a moving average of the StochRSI, usually a 3-period simple moving average2. A crossover occurs when the StochRSI crosses above or below the signal line, indicating a change in momentum2. For example, a bullish crossover occurs when the StochRSI crosses above the signal line from below. This suggests that the upward momentum is increasing and the price may rise further.

To illustrate how to use the Stochastic RSI indicator use the following rules:

Look for long entries only when prices are trading above the 200-period exponential moving average (EMA). This indicates that the overall trend is bullish.
Wait for the RSI to fall below 20 and the Stochastic to cross above the 30 oversold levels. This indicates that the price is oversold and may bounce back.
Then, go long on the next open bar. This is the entry signal.
When the RSI falls below 50 from above, exit the position. This is the exit signal.