What is the difference between RSI and Stochastics?

I'm going through my babypips education and I can't seem to understand the difference between the two. They look similar. Thanks.

Ok lets see if i can get this straight.

RSI: Stands for relative strength index which shows how strong/weak the market is at a given time. With the 20, 50 and 80 levels. It shows you how over bought/over sold conditions. Long trades are usually taken when above 50 and short trades below 50, although you can't rely on them alone.


Stochastics:

Does not show how strong/weak the market is although with the 20 and 80 levels, it can show you over bought and over sold market conditions.

So as you see there are some similarities between the two.

Hope this helps..

Cheers

I still don't understand. sorry.
You say it shows the weak and strong of the market, but doesn't the stochastics tell you that too?

All standard oscillators pretty much tell you the same thing, you can stack them up on a MT4 chart and check that this is the case visually for yourself. The ideas surrounding 'overbought' & 'oversold' and the levels at which these conditions are supposedly true are all completely arbitrary, I would not worry too much about understanding the differences.

ah, I just want to grasp the understanding on the back of my head, that's all.

I know they are relatively similar, but what distinguishes the two from each other?

staccato mentioned that RSI shows the weak/strong of the current market situation. But I still don't really understand what this means?

I see people using RSI and Stoch together at the same time.

I want to know at what situation would RSI be more better than Stoch, and vice versa.

Or how both of them can be used to benefit a situation?


thank you!!

rsi uses measurement of up or down candles (or bars..etc). as in, it counts which candles close above the previous candles close or below. then it gives you a percentage of up closes to down closes...which is then "smoothed" by an ema over a designated period.

stochastic uses measurement of actual prices it takes the lowest price of (n) periods and the highest price of (n) periods and then uses last closing price as a percentage of that range of high and low. then its smoothed with an (n) period ema.

think about the difference this makes on your own (i.e. counting up/down candles, vs high/low price) -- it'll give u a better understanding of the abilities/inabilities of indicators. i tend to find many newbies rely too much on indicators as magic writing on the wall for sure-win trades. at the end of the day its simply a graphical illustration of a numerical/statistical observation. interpret it as you will.

Start here and if you ever find your way out let us know how you are getting on...

http://www.investopedia.com/categori...alanalysis.asp

Thank you very much!