What Is the Kairi Relative Index (KRI)?
The Kairi Relative Index, a venerable figure in the pantheon of technical indicators, serves as a beacon for traders navigating the tempestuous seas of asset pricing. This metric measures the deviation of an asset’s price from its simple moving average (SMA), providing signals that suggest optimal moments to buy or sell.
Key Takeaways
- Signal Provider: KRI acts as a lighthouse, guiding traders through the fog with clear buy and sell signals based on price deviations.
- Flexibility in Use: Tailor the KRI’s sensitivity by adjusting the time period of the SMA, making it a versatile tool for various trading strategies.
- Complementary Tool: Best used in conjunction with other indicators, the KRI ensures that your trading strategy is well-rounded and robust.
Formula and Calculation of KRI
To calculate the Kairi Relative Index, embrace the elegance of its simplicity:
Kairi Relative Index (KRI) = ((Close − SMA) / SMA) × 100
Where:
- Close: the most recent closing price
- SMA: Simple Moving Average over ’n’ periods
This formula yields a percentage that indicates how far the current price strays from its average, a vital metric for detecting anomalies in price patterns.
Application and Interpretation
Originating from the land of the rising sun, Japan, and stepping into the limelight in the mid-20th century, KRI was the brainchild of a visionary investor whose name has been lost in the mists of time. Although later overshadowed by the Relative Strength Index (RSI), KRI still holds value in specific market conditions, particularly in identifying overbought or oversold states.
Example of Practical Use
Consider the KRI in action on an Apple Inc. (AAPL) chart. Observing KRI peaks above 15 and troughs below -10 over several years can illuminate potential buy or sell moments when combined with trend analysis and other indicators for confirmation.
Key Points to Consider
- Historical Context: Understand the typical extreme values for KRI specific to each asset for more accurate interpretation.
- Confirmation Is Key: Use KRI as part of a broader analytical approach; wait for price confirmation before executing trades based on KRI signals.
Related Terms
- Relative Strength Index (RSI): Measures the speed and change of price movements by comparing upward and downward close-to-close movements.
- Simple Moving Average (SMA): A straightforward, arithmetic moving average calculated by adding recent closing prices and dividing by the number of periods.
- Bollinger Bands: A volatility indicator that includes a simple moving average and two standard deviation lines above and below it.
Recommended Reading
To dive deeper into the ocean of technical analysis and enhance your trading arsenal, consider the following tomes:
- “Technical Analysis of the Financial Markets” by John J. Murphy — A comprehensive guide covering a wide range of trading disciplines including KRI.
- “Encyclopedia of Chart Patterns” by Thomas N. Bulkowski — Offers detailed analysis of trading patterns and strategies, enhancing understanding of market signals.
In your voyage across the market’s vast horizons, let the Kairi Relative Index serve as your sextant, helping navigate through the currents of price volatility with precision and grace.
