KRI (Kairi relative index)
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The Kairi relative index is a method of using technical analysis to select investment securities. Commonly used when trading foreign exchange, it is first compiled by taking a moving average, which is the average of prices over a certain period of time that rises and falls over time. This moving average is then compared to the current price, with the deviation between the two values being presented as a percentage of the moving average. Using this deviation allows investors to track the Kairi relative index, which originated in Japan, to decide whether to buy or sell the securities under study and when to make those transactions.
Investors often differ in the way that they select investment securities. Some investors choose to study fundamental issues, such as the financial strength of a stock issuer, which can affect the price of securities. Others are less concerned with fundamentals, focusing instead on security prices, especially how past prices might indicate future performance. These people are likely to choose the Kairi relative index to make their investment choices.
Like many other technical indicators, the Kairi relative index is effective at showing momentum, which can determine whether a price trend will continue or run out of steam. First, the moving average of the security is constructed. This is achieved by averaging prices over a period of time. Choosing a longer timeframe for the moving average results in a more accurate index, although a shorter average may be good for spotting short-term trends.
Once the moving average is collected, it is subtracted from the current price of the security. Then this number is divided by the moving average, and the resulting amount is multiplied by 100 to get a percentage. The resulting percentage is the Kairi relative index. When the index is high and positive, it indicates that the investor should sell; if it is high and negative, the investor should buy.
The Kairi relative index chart can also show the investor entry points, which are the exact points when the trend is about to start. This is done by using the center line, which in Kairi's case will always be zero. At the point where the index rises above the center line, it is time for an uptrend. If the index line falls below the top centerline, this should indicate the beginning of a downtrend for the security.
KRI is calculated by the formula:
where:
SMA — Simple Moving Average;
N — number of periods used for calculation.
Period: averaging period for calculation, default is 13.
KRI calculates the deviation of the current price from its simple average as a percentage of the moving average. If the percentage is sufficiently high and positive, these are signals to sell, large and negative - to buy. This indicator looks as follows on the chart:
