Sage Investment Club

## Introduction to the Double Stochastic RSI Indicator

Oscillators which are bound within a fixed range are often effective for identifying potential mean reversals. One example of this indicator is the Stochastic Oscillator, which is very effective for identifying mean reversals based on shorter price swings and pulses.

Just like the classic Stochastic Oscillator, the Double Stochastic RSI Indicator is also an effective tool for identifying mean reversals. However, it is geared towards longer trends rather than shorter price swings.

## What is the Double Stochastic RSI Indicator?

The Double Stochastic RSI Indicator is a momentum indicator which is based on the Stochastic Oscillator and the Relative Strength Index (RSI). It is used help traders identify overbought and oversold markets as well as its potential reversal signals.

This indicator is an oscillator type of technical indicator which plots a line that oscillates within the range of zero to 100. It also has markers at levels 20 and 80 represented by a dashed line. The area below 20 represents the oversold area, while the area above 80 represents the overbought area.

The indicator detects an oversold market whenever its line drops below 20. It then shades the area brown to indicate an oversold market level. Inversely, it also detects overbought markets whenever the line breaches above 80. It then shades the area blue to indicate an overbought market.

Given the characteristics of this indicator, it can be effectively used as a mean reversal signal indicator based on reversals coming from overbought and oversold market levels.

## How the Double Stochastic RSI Indicator Works?

The Double Stochastic RSI Indicator uses a complex algorithm which uses an underlying RSI and applies a formula which is somewhat similar to that of the Stochastic Oscillator. The resulting value is then plotted as a point on the oscillator line.

The indicator also detects whether the value of the line is below 20 or above 80. It then shades the area based whenever the line value is below 20 or above 80.

## How to use the Double Stochastic RSI Indicator for MT5

The Double Stochastic RSI Indicator has several variables and options which can be modified within its settings.

“RSI period” refers to the number of periods used on the underlying RSI calculation.

“RSI applied price” refers to the price point on a candlestick used to calculate for the RSI.

“Stochastic period 1”, “Stochastic period 2”, and “Smoothing period” are variables which relate to the Stochastic calculations.

“Overbought level” and “Oversold level” modifies the markers set as the overbought and oversold levels.

When to Enter?

Wait for the line to drop below 20 then open a buy order as the line crosses above 20.

When to Exit?

Close the trade as soon as the line starts to slope down.

When to Enter?

Wait for the line to breach above 80 then open a sell order as the line crosses below 80.

When to Exit?

Close the trade as soon as the line starts to slope up.

## Conclusion

The Double Stochastic RSI Indicator can be a very effective mean reversal indicator. It is not perfectly accurate but its reversal signals do have a very high probability of resulting in an actual mean reversal. Its reversal signals also lean towards the mid-term trends rather than short pulses, which allows for higher potential gains on a profitable trade.

Double Stochastic RSI Indicator for MT5 is a Metatrader 5 (MT5) indicator and the essence of this technical indicator is to transform the accumulated history data.

Double Stochastic RSI Indicator for MT5 provides for an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.

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#### How to install Double Stochastic RSI Indicator for MT5.mq5 to your MetaTrader 5 Chart?

• Copy Double Stochastic RSI Indicator for MT5.mq5 to your Metatrader 5 Directory / experts / indicators /
• Select Chart and Timeframe where you want to test your mt5 indicator
• Right click on Double Stochastic RSI Indicator for MT5.mq5
• Attach to a chart
• Modify settings or press ok
• Indicator Double Stochastic RSI Indicator for MT5.mq4 is available on your Chart

#### How to remove Double Stochastic RSI Indicator for MT5.mq5 from your Metatrader 5 Chart?

• Select the Chart where is the Indicator running in your Metatrader 5 Client
• Right click into the Chart
• “Indicators list”
• Select the Indicator and delete