The Kairi Relative Index is a method of using technical analysis to choose investment securities. Typically used in trading foreign currencies, it is compiled by first taking a moving average, which is the average of prices over a certain period of time that rises and falls as time passes. This moving average is then measured against the current price, with the deviation between the two being represented as a percentage of the moving average. Using this deviation allows investors following the Kairi Relative Index, which originated in Japan, to decide whether to buy or sell the securities being studied and when those transactions should be made.
Investors often vary in the way that they choose their investment securities. Some investors choose to study the fundamental issues, such as the financial strength of a company issuing stock, that can affect the prices of securities. Others aren't as concerned with the fundamentals, instead focusing solely on the prices of securities, specifically how past prices can indicate future performance. These people are the ones likely to select the Kairi Relative Index to help make their investment choices.
Like many other technical indicators, the Kairi Relative Index is effective in showing momentum, which can determine whether a price trend will continue or run out of steam. A moving average of the security is first constructed. This is done by averaging out its prices over a period of time. Choosing a longer period of time for the moving average results in a more accurate index, although a shorter average can be fine for spotting short-term trends.
Once the moving average is collected, it is subtracted from the current price of the security. This number is then divided by the moving average, and the resulting amount is multiplied by 100 to create 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.
Graphing the Kairi Relative Index can also show an investor entry points, which are the exact points when a trend is about to begin. This is done by using the center line, which, in this case of Kairi, will always be zero. At the point which the index goes above the center line, it is time for an upward trend. Should the index line go below the center line from above, it is supposed to indicate the beginning of a downward trend for the security.