The Kairi Relative Index (KRI) is a technical analysis tool that compares an asset's price movement to its average over 10–20 days. The Japanese oscillator KRI helps traders spot trends and flag overbought or oversold circumstances. If the KRI is positive, the price may be overvalued, and a selling opportunity. A negative KRI suggests undervaluation, opening up purchasing opportunities. Based on these discrepancies, traders utilize the KRI to decide market entry or exit positions. However, the KRI has lost favor as alternative indicators like the Relative Strength Index (RSI) have gained prominence. Numerous indications and market aspects are essential for efficient decision-making with any technical analysis tool.

Kairi Relative Index (KRI) in Technical Analysis

The Kairi Relative Index indicator is a momentum oscillator in technical analysis that helps track and comprehend financial asset price changes. This oscillator helps traders spot trends, determine market entry and exit points, and assess asset momentum over time. One needs to understand the KRI's mechanism, formula, and computation.

Momentum oscillators like the KRI measure an asset's price over a given timeframe. Traders use this data to assess market mood and trend changes. The KRI tells traders if an asset moves positively or negatively, aiding decision-making.

Kairi Relative Index Formula

A simple algorithm compares an asset's current price to its moving average over a selected time to compute the KRI. This is the formula:

Kairi Relative Index (KRI)= [SMAn Close−SMAn]×100

"SMA" stands for Simple Moving Average, and "n" is the number of computation periods. The Kairi indicator algorithm calculates the percentage difference between the closing price and the SMA over several sessions. In plain terms, the KRI shows how far the closing price deviates from its average over time. Good results show the price is above normal, suggesting good momentum.

This formula yields a positive or negative number. Positive KRI indicates increased momentum or price trend since the price is above the moving average. With a negative KRI, the price is below the moving average, indicating a downward trend.

Kairi Relative Index Calculation

The KRI compares the current price to the moving average to reveal market trends. KRI values below 100 imply negative momentum and a price decline. A score above 100 indicates positive momentum, indicating a price increase throughout the period. Take an asset priced at $50 with a 10-day moving average of $60. The KRI would be -16.7, indicating negative momentum. Should the price climb to $90 and the 10-day moving average rise to $70, the KRI becomes 28.6, suggesting strong momentum. A high KRI rating of 28.6 may indicate overbought assets and a mean reversal.

Uses of Kairi Relative Index

A key KRI function is determining an asset's current price's distance from its moving average. This indicator helps traders and buyers quantify market activity. It might indicate overbought or oversold assets. Volatile assets have higher KRI scores, which puts them farther from their moving averages. From -7 to -15, the SPDR S&P 500 ETF (SPY) may indicate an oversold market, whereas 4 to 10 indicates an overpriced market. When stock prices are unexpected, -40 or +50 may occur.

One of the KRI's best qualities is its history. The indicator's peak and lowest marks for a commodity are visible to traders. These historical peaks can help predict future changes. Knowing these data helps traders identify market-changing stopping points. A low KRI indicates that the goods were sold too low, which might cause a comeback. But be cautious and wait for favorable signals, like a real price increase, before buying. A high KRI suggests the commodity has been overbought and may fall. Traders should wait for confirmation, such as a product price decline, before selling.

Like many technical indicators, the KRI works well with other analytical tools. Traders employ risk management and confirming indications to improve KRI-based decisions. Waiting for the price to corroborate the KRI's signal reduces phony alarms and makes market entry and exit safer. The Kairi Relative Index is a moving indicator that helps buyers assess the market and price trends. By analyzing prior peaks, KRI values, and positive indicators, traders may utilize the KRI to make smarter decisions, control risk, and navigate complex financial markets.

Example

The weekly Kairi Relative Index (KRI) chart for Apple Inc. (AAPL) shows a seven-year historical study. As a momentum oscillator, the KRI shows extreme levels that may indicate buying or selling. Readings over 15 indicate overbought situations, while below -10 hint at oversold conditions. Vertical lines on the k-index chart indicate severe KRI readings, with green lines recommending buy and red lines indicating sell. This strategy systematically identifies market entrance and departure locations. However, the KRI's limitations must be acknowledged.

The example shows that KRI-only transactions might be risky. Some purchase indications corresponded with Apple's price decline, causing hasty entry. Some sell indications were too early, missing price rises. The example stresses waiting for other indicators or price movement confirmation to improve KRI-based judgments. Instead of acting impulsively on KRI signals, traders should look for additional signs, such as the price rising after an extremely negative KRI reading (indicating oversold conditions) or falling after an extremely positive KRI reading (indicating overbought conditions).

This careful strategy reduces false signals and helps traders join and exit the market optimally. While useful, the KRI works well alongside other analytical tools to get a complete picture of the market's working. The k-index chart concludes by applying the KRI to AAPL and showing its historical indications, emphasizing the necessity for trading caution. By integrating KRI insights with other confirmatory indicators, traders may better traverse market complexity and make educated decisions.

Differences With MACD

The financial analysis uses technical indicators like the Kairi Relative Index indicator and MACD. The KRI measures closing price divergence from the Simple Moving Average (SMA) to identify overbought or oversold circumstances. Two exponential moving averages, often with 12 or 26 periods, are used to calculate MACD. Typically, a 9-period exponential moving average serves as the signal line for the MACD, which in turn generates trade signals. The KRI measures momentum and trend reversals by comparing the closing price to the SMA, whereas the MACD employs exponential moving average convergence and divergence with a signal line.