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Definition: Kairi Relative Index (KRI)
KRI is an index which is used to track fluctuations and spot relationship in trending markets. It is a method of choosing investment securities by using technical analysis. It is also called the forgotten oscillator. As last time that it was significantly used was in 1970s. Investors and traders have ignored it in recent decades.
It resembles the Welles Wilder's RSI, Relative Strength Index and is measured by calculating the deviation between current price and moving average taken over certain period of time. The deviation is then represented as a percentage of the moving average. It is thus an oscillator which is used for calculating price fluctuation. It also functions as a momentum oscillator describing the strength of deviation of the price and is considered a leading indicator.
KRI = (Price - Simple Moving Average over a period)/ Simple Moving Average over a period * 100
Based on assumptions and trial calculations, an average period of 10 or 20 days can be used to calculate the moving average. The default period for such calculations is 14. If KRI is highly positive, it indicates that the security is overbought and it should be sold. This provides an early indication of entry or exit. As a centerline indicator, it is the center line that determines long or short, trends or entry / exit. The center line for the indicator is set at 0; if the line crosses below the center, go short else go long if the line crosses above. This strategy may not work if the market remains in overbought and oversold category for an extended period of time.
Investors have various ways of deciding how to choose the securities to invest in. Some may believe in fundamentals to study the financials of the company while the others focus on the past pricing trends to predict the price in future. The investors who believe in price trends will use the KRI to make their investments.
An old Japanese indicator by an unknown founder at an unknown date KRI, has its popularity waning because now a days the investors look for perfect market timing indicators which follow market trends and turns and not just deviation in price. Also price variation as trends or centerline, may lead to false breaks. If the market line go below the centerline causing short selling and then it would easily cross back leading to losses.