The Stochastic RSI was developed to increase the sensitivity and reliability of the regular RSI indicator especially when the trader wants to trade during periods when the RSI is in overbought/oversold condition.
The creators of this indicator – Tushar Chande and Stanley Kroll – explain that very often the RSI oscillator remains at the levels 20 and 80 for extended periods of time without even reaching the overbought and oversold areas where many traders look for opportunities to enter the market.
Therefore, when the RSI is combined with the stochastic oscillator, a new indicator, the Stochastic RSI, offers better and clearer signals for opening and closing positions.