All language subtitles for 7. RSI Vs. Stochastic Oscillator When Use Which

So we learned some powerful momentum indicators from oscillating indicators that can be really, really

good, and you might be asking yourself, OK, what's the difference between an RSI and the stochastic

oscillator?

And what's the difference?

And is there a better time when I should use one or the other?

And that's we're going to talk about in this lesson.

So first off, let's talk about the similarities, because it's most more similar than different, actually.

So what this is a classic oscillator and the relative strength index, they are both widely used.

So they're both widely used, are both very, very popular.

They're both momentum oscillators.

So that means it's going to be between zero and one percent.

So they're all going to be percentages and they're all going to be positive numbers.

They're really looking at these overbought and oversold situations.

That's what we're trying to identify as we get closer to peaks and troughs of overbought and oversold

securities.

And it's simpler, simpler to use simply.

You can just choose your parameters or just choose it and overlay the graph and you can just watch for

the as we learned in the previous lessons, you can watch from the conditions, the buy and sell signals,

and they're real good to use to confirm with other indicators.

So if you're using something else as your primary indicator, a candlestick pattern or chart pattern,

maybe a moving average, whatever it might be, these oscillators, these stochastic oscillation relative

strength index are good to use to kind of confirm what you're seeing.

So really what the big difference is in how we might apply that isn't under the underlying philosophy

which gets into the math, which gets in the calculation.

Again, you have to calculate on your platform.

But if you think about philosophically, this is where the difference comes in.

The sarcastic oscillator is predicated on the assumption that closing prices should close near the same

direction as the current trend.

So if you've got an uptrend, you should have uptrend in closing prices and that that close should close

near that same direction or in that trend.

So emphasizes that that trend, part of that of the closing prices, the RSI is designed to measure

the speed, the acceleration, the acceleration of price movements.

They both kind of do a little bit.

But RSI, that's really all about speed.

That's really where you are Chines and where it's where strength lies as far as in that.

So kiis which to use.

When was her strength of one over the other?

Well, they're both actually very good and what they do, and that's why they're so similar.

So what's more, the similarities.

But if we were to nit pick and say, well, if we were to really say, OK, what's the best for each

of these?

Versus they're both good and any other types of markets as an oscillator, as a momentum indicator,

a stochastic oscillator is it tends to be best for choppy or sideways markets, you know, where there's

no great you know, no great trend ID, there's nothing great.

We've seen the trend be identified because trying to help identify, you know, or is kind of helping

to decide whether it's overbought or oversold is not a clear trend.

And so if you used in a strong trend thing, sometimes that can cause a premature exit.

Let's see if you're on a strong upward trend and it's accelerating.

Stochastic might not show that as much.

And you might exit a little bit sooner with a stochastic oscillator as opposed to, let's say, the

relative strength index, which is really great for trending markets.

You know, is it accelerating that trend?

Is it keeping getting strong or is that decelerating that trend?

And that trend could be either up, you know, an upward trend or a downward trend.

But it's really great for those markets.

Now, as we saw in the lesson, RSI, it can also help reduce the choppiness and things of whipsaws

that a standard momentum, you know, the basic ROIC, a rate of change, momentum, US momentum indicator

uses.

But if we were and that's why stochastic oscillators in relative strength index are both, I would say,

better than the momentum indicator overall, depending how you use it.

But, you know, that's just an opinion at that point.

But the RSI was good for identifying and take you out of that less trading range, too.

So this is all, again, all real kind of nitpicky stuff, real kind of detail stuff around it.

But I would say certainly if you've got a market that's really trending strongly or trending and you're

working a trend, I would definitely tend to rely on that.

RSI, you know, stochastic oscillator can give you those false signals in those trending areas.

So with a really the big takeaway from this is if it's a strong trend, either way, use the RSI.