Kairi Relative Index (KRI)

Key takeaways
* The Kairi Relative Index (KRI) measures how far the current closing price is from its simple moving average (SMA), expressed as a percentage.
* Extreme positive readings suggest overbought conditions (potential sell); extreme negative readings suggest oversold conditions (potential buy).
* “Extreme” levels depend on the asset’s volatility—volatile assets show larger swings.
* The KRI is not a precise timing tool; use it with price confirmation or other indicators.

What is the Kairi Relative Index?
The KRI is a momentum/mean‑reversion indicator that quantifies the percentage difference between a security’s most recent closing price and its n‑period simple moving average. Traders use it to spot when price has moved unusually far from the average and may be ripe for a reversal or correction.

Formula
KRI = [(Close − SMA_n) / SMA_n] × 100

Where:
* Close = most recent closing price
* SMA_n = simple moving average of the last n periods (commonly n = 10–20)

How to calculate the KRI
1. Compute the n‑period simple moving average of closing prices.
2. Subtract the SMA_n from the most recent close.
3. Divide that difference by SMA_n.
4. Multiply the result by 100 to express as a percentage.
5. Repeat each period to produce a KRI series.

What the KRI indicates
* Positive KRI: price is above the SMA. Large positive values indicate the price is significantly above its recent average (possible overbought).
* Negative KRI: price is below the SMA. Large negative values indicate the price is significantly below its recent average (possible oversold).
* Because different assets have different volatility, you must determine historically meaningful “extreme” levels for each asset (for example, SPY extremes might be roughly −7 to −15 on the low side and +4 to +10 on the high side, while individual volatile stocks can reach much larger magnitudes).

Practical use and confirmation
* Treat extreme KRI readings as alerts, not automatic trade signals.
* Wait for price confirmation—e.g., a reversal candlestick pattern, break of a trendline, or supporting signals from other indicators (momentum oscillators, volume, etc.)—before entering a trade.
* Avoid trying to short a strong, fast uptrend or buy in a steep downtrend solely because the KRI shows an extreme; strong trends can sustain extreme KRI values.

Example (summary)
Applied to a weekly Apple (AAPL) chart over several years:
* Typical extreme highs were around +15 or above; extreme lows were below −10.
* Some KRI buy or sell signals would have profited, but many would have been premature without price confirmation—e.g., buys triggered while price continued declining or sells issued while price still had upward momentum.
* This highlights the need to combine KRI signals with confirmation of a genuine price turn.

KRI vs. MACD
* KRI measures the percentage deviation between price and a single SMA.
* MACD measures the difference between two exponential moving averages and commonly uses a signal line for crossovers.
* KRI is focused on distance from the mean (overbought/oversold distance); MACD emphasizes changes in trend and momentum between two EMAs.

Limitations and best practices
* KRI reflects historical averages; it does not predict future price behavior on its own.
* Extreme readings can indicate strong trends; acting solely on extremes risks entering against momentum.
* The indicator can move toward neutral without price reversal if the SMA catches up with price—so KRI movement alone isn’t definitive.
* Customize the SMA period and observe past KRI extremes for the specific asset to set meaningful thresholds.
* Combine KRI with price action, trend analysis, and other technical tools for better signal quality.

Conclusion
The Kairi Relative Index is a simple, intuitive tool to measure how far price has deviated from its recent average. It is most useful as an alert for potential overbought or oversold conditions, but should be paired with confirmation and complementary analysis before making trading decisions.