2002issue C081-14
Constructing a stochastic RSI with Bollinger bands
A worksheet construction that builds a 14-period relative strength index from the close, wraps the close and that oscillator in 21-period band envelopes, then applies a 14-period stochastic transform to the RSI so each measured series stays in view.
- A 14-period relative strength index is computed from the close and then kept as an input series for later transforms.
- Price bands sit around a 21-period average of the close by adding and subtracting two standard deviations of the high, and the same style of envelope is recomputed on the RSI series.
- The stochastic step uses a 14-period lookback on the RSI series itself, which produces a stochastic RSI rather than a price stochastic.
- Open, high, low, close, and volume columns stay on the worksheet so the oscillator stack can be aligned bar-for-bar with the price series.
One stack, several measured series
This construction assembles a relative strength index, band envelopes, and a stochastic transform on a single worksheet. The archive workflow is a sequence of named series rather than one collapsed line.
Editorial reading: keep the layers separate while you read. The teaching point is to know, at each step, whether the input is the close, the relative strength index, or a further transform of that oscillator.
Relative strength from the close
The construction computes a 14-period relative strength index from the close series.
In this stack the relative strength index is a bounded oscillator computed from a lookback of closes. Once that oscillator exists, it is available as an input series for further transforms.
Band envelopes around the close
Upper and lower bands around a 21-period average of the close are formed by adding and subtracting two standard deviations of the high over the same 21-period window.
Those bands are an envelope built from a moving average plus and minus a multiple of a same-window standard deviation. Here the average is taken from the close, while the standard deviation is taken from the high.
The same envelope on the RSI series
The same average-plus-two-standard-deviation envelope is recomputed on the RSI series using a 21-period window.
Editorial reading: this second envelope does not replace the price bands. It measures the oscillator, so a price envelope and an envelope of relative strength can be read as two different series.
A stochastic transform of RSI, not of price
A stochastic transform is applied to the RSI series itself over a 14-period lookback, producing a stochastic RSI rather than a price stochastic.
The stochastic oscillator is a range-position transform. In this construction it is applied to the RSI series rather than to raw price highs, lows, and closes.
Price columns stay on the worksheet
The worksheet also retains the raw open, high, low, close, and volume columns so the oscillator stack can be aligned bar-for-bar with the price series.
Editorial reading: leave those columns visible beside the oscillators. Alignment is part of the construction, because each transform still belongs to the same bar as the price it was built from.
All readings on this track · 45 readings
- 1992Constructing volatility-scaled bands with relative strength index confirmation
- 1994Implied volatility as a band-defined regime filter for index options
- 1995Constructing projection bands from least-squares slopes
- 1995Constructing regression projection bands and range oscillators
- 1996Constructing Bollinger bands, percent-b, and stochastics
- 1996Constructing mechanical rules from Bollinger Bands and stochastics
- 1996Constructing a standard-error envelope around a linear regression
- 1996Dual-horizon ratio envelopes and regression error channels
- 1997Rational group structure with a trend screen, RSI, and bands
- 1997Asymmetric volatility band construction
- 1998Constructing three-state filters from Bollinger band envelopes
- 1999Combination filters with Bollinger Bands and the relative strength index
- 1999Constructing stochastic timed exits and band-RSI reversals
- 1999Evaluating Bollinger Bands against fixed-width and range-based envelopes
- 2000Constructing a Bollinger Band target as a forward price
- 2001Numeric candlestick encoding with local size bands
- 2001Ranked candlestick sentiment to band-cross entries
- 2002Combining Bollinger Bands, RSI, and a stop-loss
- 2002Bollinger Bands remain filters, not forecasts
- 2002Constructing a stochastic RSI with Bollinger bands
- 2002Constructing a StochRSI and Bollinger mechanical system
- 2003Constructing volatility-scaled Bollinger envelopes
- 2003Why tick breadth fails as a market personality
- 2005Constructing Bollinger bands versus fixed trading bands
- 2006Squared versus absolute deviation in envelope construction
- 2006Confirming yen crossovers with implied volatility and bands
- 2006A daily candle reversal is a hypothesis until shorter sessions fail at the same zone
- 2008Rebuild the Relative Strength Index as price-scale bands
- 2008Reading Relative Strength Index extremes on one price axis with Bollinger Bands and moving averages
- 2011Three-filter confirmation for short-swing futures
- 2011Constructing an inverse Fisher stochastic with bands and averages
- 2012Constructing a Bollinger Band indicator suite
- 2012Stacking price extremes, crossovers, bands, and MACD
- 2012Adaptive Bollinger band impulse, trend, and momentum filters
- 2013Rescaling stochastic, percent-B, and wave-count parameters
- 2014Industry-group quartile pivots as a Bollinger Bands case study
- 2014Bollinger Bands as adaptive price envelopes: a 2014 classroom case
- 2016Trend-channel entry rules from stacked moving averages
- 2016A permission stack for Bollinger, RSI, and the 50-period average
- 2017Constructing weighted Bollinger bands and volume averages
- 2017Four swing-entry rules that share a timed exit
- 2017Two-wave monthly cycles as a regime filter
- 2019Constructing exponential-deviation-bands from a midline-average
- 2020Critiquing exponential variants of Bollinger Bands
- 2020Constructing selectable volatility and moving-average bands