Hi CatLady.......Glad you have Chande's "New Technical Trader" to corroborate some points on StochRSI, I haven't read that work, but I think you might have misinterpreted one of my criticisms of the referenced Steve Karnish post. Let's look again at the two subject equations:
((RSI(21)-LLV(RSI(21),8))/((HHV(RSI(21),13))-LLV(RSI(21),13)))
Mov((RSI(21)-LLV(RSI(21),13))/(HHV(RSI(21),8)-(LLV(RSI(21)+.00001,13))),8,E)
*100
Within the first equation, Steve has used (inadvertantly or not)two different Stochastic lookback periods for the "lowest low value" of RSI(21)-- LLV(RSI(21),8) and LLV(RSI(21),13). This makes no rational sense whatsoever and is not in agreement with how a Stochastic is defined. I doubt very much that such a liberty was intended when Chande said:
"For symmetry we use the same number of days in the look-back period as those in the RSI calculations, but you can experiment with different calculation periods if you wish."
The second equation similarly varies the Stochastic lookback period but this time between the LLV and HHV functions. Nonsensical, might as well use RSI(21), RSI(13) and RSI(8), all within the SAME equation.
I'll compromise my assessment and call these two equations irrational rather than in error. I really think they might be typographical errors. The other possibility is that Steve Karnish was going wild in suggesting equation modifications to consider. The interesting point is that even a totally "irrational" equation or one in obvious error might do a decent job of calling the tops and bottoms as the RSI is notoriously relatively insensitive to its lookback period.
Charles |
