RSI Multiple TimeFrame, Version 1.0RSI Multiple TimeFrame, Version 1.0
Overview
The RSI Multiple TimeFrame script is designed to enhance trading decisions by providing a comprehensive view of the Relative Strength Index (RSI) across multiple timeframes. This tool helps traders identify overbought and oversold conditions more accurately by analyzing RSI values on different intervals simultaneously. This is particularly useful for traders who employ multi-timeframe analysis to confirm signals and make more informed trading decisions.
Unique Feature of the new script (described in detail below)
Multi-Timeframe RSI Analysis
Customizable Timeframes
Visual Signal Indicators (dots)
Overbought and Oversold Layers with gradual Background Fill
Enhanced Trend Confirmation
Originality and Usefulness
This script combines the RSI indicator across three distinct timeframes into a single view, providing traders with a multi-dimensional perspective of market momentum. It also provides associated signals to better time dips and peaks. Unlike standard RSI indicators that focus on a single timeframe, this script allows users to observe RSI trends across short, medium, and long-term intervals, thereby improving the accuracy of entry and exit signals. This is particularly valuable for traders looking to align their short-term strategies with longer-term market trends.
Signal Description
The script also includes a unique signal feature that plots green and red dots on the chart to highlight potential buy and sell opportunities:
Green Dots : These appear when all three RSI values are under specific thresholds (RSI of the shortest timeframe < 30, the medium timeframe < 40, and the longest timeframe < 50) and the RSI of the shortest timeframe is showing an upward trend (current value is greater than the previous value, and the value two periods ago is greater than the previous value). This indicates a potential buying opportunity as the market may be shifting from an oversold condition.
Red Dots : These appear when all three RSI values are above specific thresholds (RSI of the shortest timeframe > 70, the medium timeframe > 60, and the longest timeframe > 50) and the RSI of the shortest timeframe is showing a downward trend (current value is less than the previous value, and the value two periods ago is less than the previous value). This indicates a potential selling opportunity as the market may be shifting from an overbought condition.
These signals help traders identify high-probability turning points in the market by ensuring that momentum is aligned across multiple timeframes.
Detailed Description
Input Variables
RSI Period (`len`) : The number of periods to calculate the RSI. Default is 14.
RSI Source (`src`) : The price source for RSI calculation, defaulting to the average of the high and low prices (`hl2`).
Timeframes (`tf1`, `tf2`, `tf3`) : The different timeframes for which the RSI is calculated, defaulting to 5 minutes, 1 hour, and 8 hours respectively.
Functionality
RSI Calculations : The script calculates the RSI for each of the three specified timeframes using the `request.security` function. This allows the RSI to be plotted for multiple intervals, providing a layered view of market momentum.
```pine
rsi_tf1 = request.security(syminfo.tickerid, tf1, ta.rsi(src, len))
rsi_tf2 = request.security(syminfo.tickerid, tf2, ta.rsi(src, len))
rsi_tf3 = request.security(syminfo.tickerid, tf3, ta.rsi(src, len))
```
Plotting : The RSI values for the three timeframes are plotted with different colors and line widths for clear visual distinction. This makes it easy to compare RSI values across different intervals.
```pine
p1 = plot(rsi_tf1, title="RSI 5m", color=color.rgb(200, 200, 255), linewidth=2)
p2 = plot(rsi_tf2, title="RSI 1h", color=color.rgb(125, 125, 255), linewidth=2)
p3 = plot(rsi_tf3, title="RSI 8h", color=color.rgb(0, 0, 255), linewidth=2)
```
Overbought and Oversold Levels : Horizontal lines are plotted at standard RSI levels (20, 30, 40, 50, 60, 70, 80) to visually identify overbought and oversold conditions. The areas between these levels are filled with varying shades of blue for better visualization.
```pine
h80 = hline(80, title="RSI threshold 80", color=color.gray, linestyle=hline.style_dotted, linewidth=1)
h70 = hline(70, title="RSI threshold 70", color=color.gray, linestyle=hline.style_dotted, linewidth=1)
...
fill(h70, h80, color=color.rgb(33, 150, 243, 95), title="Background")
```
Signal Plotting : The script adds green and red dots to indicate potential buy and sell signals, respectively. A green dot is plotted when all RSI values are under specific thresholds and the RSI of the shortest timeframe is rising. Conversely, a red dot is plotted when all RSI values are above specific thresholds and the RSI of the shortest timeframe is falling.
```pine
plotshape(series=(rsi_tf1 < 30 and rsi_tf2 < 40 and rsi_tf3 < 50 and (rsi_tf1 > rsi_tf1 ) and (rsi_tf1 > rsi_tf1 )) ? 1 : na, location=location.bottom, color=color.green, style=shape.circle, size=size.tiny)
plotshape(series=(rsi_tf1 > 70 and rsi_tf2 > 60 and rsi_tf3 > 50 and (rsi_tf1 < rsi_tf1 ) and (rsi_tf1 < rsi_tf1 )) ? 1 : na, location=location.top, color=color.red, style=shape.circle, size=size.tiny)
```
How to Use
Configuring Inputs : Adjust the RSI period and source as needed. Modify the timeframes to suit your trading strategy.
Interpreting the Indicator : Use the plotted RSI values to gauge momentum across different timeframes. Look for overbought conditions (RSI above 70, 60 and 50) and oversold conditions (RSI below 30, 40 and 50) across multiple intervals to confirm trade signals.
Signal Confirmation : Pay attention to the green and red dots that provide signals to better time dips and peaks. dots are printed when the lower timeframe (5mn by default) shows sign of reversal.
These signals are more reliable when confirmed across all three timeframes.
This script provides a nuanced view of RSI, helping traders make more informed decisions by considering multiple timeframes simultaneously. By combining short, medium, and long-term RSI values, traders can better align their strategies with overarching market trends, thus improving the precision of their trading actions.
상대강도지수 (RSI)
Wall Street Cheat Sheet IndicatorThe Wall Street Cheat Sheet Indicator is a unique tool designed to help traders identify the psychological stages of the market cycle based on the well-known Wall Street Cheat Sheet. This indicator integrates moving averages and RSI to dynamically label market stages, providing clear visual cues on the chart.
Key Features:
Dynamic Stage Identification: The indicator automatically detects and labels market stages such as Disbelief, Hope, Optimism, Belief, Thrill, Euphoria, Complacency, Anxiety, Denial, Panic, Capitulation, Anger, and Depression. These stages are derived from the emotional phases of market participants, helping traders anticipate market movements.
Technical Indicators: The script uses two key technical indicators:
200-day Simple Moving Average (SMA): Helps identify long-term market trends.
50-day Simple Moving Average (SMA): Aids in recognizing medium-term trends.
Relative Strength Index (RSI): Assesses the momentum and potential reversal points based on overbought and oversold conditions.
Clear Visual Labels: The current market stage is displayed directly on the chart, making it easy to spot trends and potential turning points.
Usefulness:
This indicator is not just a simple mashup of existing tools. It uniquely combines the concept of market psychology with practical technical analysis tools (moving averages and RSI). By labeling the psychological stages of the market cycle, it provides traders with a deeper understanding of market sentiment and potential future movements.
How It Works:
Disbelief: Detected when the price is below the 200-day SMA and RSI is in the oversold territory, indicating a potential bottom.
Hope: Triggered when the price crosses above the 50-day SMA, with RSI starting to rise but still below 50, suggesting an early uptrend.
Optimism: Occurs when the price is above the 50-day SMA and RSI is between 50 and 70, indicating a strengthening trend.
Belief: When the price is well above the 50-day SMA and RSI is between 70 and 80, showing strong bullish momentum.
Thrill and Euphoria: Identified when RSI exceeds 80, indicating overbought conditions and potential for a peak.
Complacency to Depression: These stages are identified based on price corrections and drops relative to moving averages and declining RSI values.
Best Practices:
High-Time Frame Focus: This indicator works best on high-time frame charts, specifically the 1-week Bitcoin (BTCUSDT) chart. The longer time frame provides a clearer picture of the overall market cycle and reduces noise.
Trend Confirmation: Use in conjunction with other technical analysis tools such as trendlines, Fibonacci retracement levels, and support/resistance zones for more robust trading strategies.
How to Use:
Add the Indicator: Apply the Wall Street Cheat Sheet Indicator to your TradingView chart.
Analyze Market Stages: Observe the dynamic labels indicating the current stage of the market cycle.
Make Informed Decisions: Use the insights from the indicator to time your entries and exits, aligning your trades with the market sentiment.
This indicator is a valuable tool for traders looking to understand market psychology and make informed trading decisions based on the stages of the market cycle.
Triple EMA + QQE Trend Following Strategy [TradeDots]The "Triple EMA + QQE Trend Following Strategy" harnesses the power of two sophisticated technical indicators, the Triple Exponential Moving Average (TEMA) and the Qualitative Quantitative Estimation (QQE), to generate precise buy and sell signals. This strategy excels in capturing shifts in trends by identifying short-term price momentum and dynamic overbought or oversold conditions.
HOW IT WORKS
This strategy integrates two pivotal indicators:
Triple Exponential Moving Average (TEMA): TEMA enhances traditional moving averages by reducing lag and smoothing the data more effectively. It achieves this by applying the EMA formula three times onto the price, as follows:
tema(src, length) =>
ema1 = ta.ema(src, length)
ema2 = ta.ema(ema1, length)
ema3 = ta.ema(ema2, length)
tema = 3*ema1 - 3*ema2 + ema3
This computation helps to sharpen the sensitivity to price movements.
Qualitative Quantitative Estimation (QQE): The QQE indicator improves upon the standard RSI by incorporating a smoothing mechanism. It starts with the standard RSI, overlays a 5-period EMA on this RSI, and then enhances the result using a double application of a 27-period EMA. A slow trailing line is then derived by multiplying the result with a factor number. This approach establishes a more refined and less jittery trend-following signal, complementing the TEMA to enhance overall market timing during fluctuating conditions.
APPLICATION
Referenced from insights on "Trading Tact," the strategy implementation follows:
First of all, we utilize two TEMA lines: one set at a 20-period and the other at a 40-period. Then following the rules below:
40-period TEMA is rising
20-period TEMA is above 40-period TEMA
Price closes above 20-period TEMA
Today is not Monday
RSI MA crosses the Slow trailing line
This strategy does not employ an active take profit mechanism; instead, it utilizes a trailing stop loss to allow the price to reach the stop loss naturally, thereby maximizing potential profit margins.
DEFAULT SETUP
Commission: 0.01%
Initial Capital: $10,000
Equity per Trade: 80%
Users are advised to adjust and personalize this trading strategy to better match their individual trading preferences and style.
RISK DISCLAIMER
Trading entails substantial risk, and most day traders incur losses. All content, tools, scripts, articles, and education provided by TradeDots serve purely informational and educational purposes. Past performances are not definitive predictors of future results.
Reference:
Trading Tact. What Is the QQE Indicator? Retrieved from: tradingtact.com
Market Cipher B by WeloTradesMarket Cipher B by WeloTrades: Detailed Script Description
//Overview//
"Market Cipher B by WeloTrades" is an advanced trading tool that combines multiple technical indicators to provide a comprehensive market analysis framework. By integrating WaveTrend, RSI, and MoneyFlow indicators, this script helps traders to better identify market trends, potential reversals, and trading opportunities. The script is designed to offer a holistic view of the market by combining the strengths of these individual indicators.
//Key Features and Originality//
WaveTrend Analysis:
WaveTrend Channel (WT1 and WT2): The core of this script is the WaveTrend indicator, which uses the smoothed average of typical price to identify overbought and oversold conditions. WT1 and WT2 are calculated to track market momentum and cyclical price movements.
Major Divergences (🐮/🐻): The script detects and highlights major bullish and bearish divergences automatically, providing traders with visual cues for potential reversals. This helps in making informed decisions based on divergence patterns.
Relative Strength Index (RSI):
RSI Levels: RSI is used to measure the speed and change of price movements, with specific levels indicating overbought and oversold conditions.
Customizable Levels: Users can configure the overbought and oversold thresholds, allowing for a tailored analysis based on individual trading strategies.
MoneyFlow Indicator:
Fast and Slow MoneyFlow: This indicator tracks the flow of capital into and out of the market, offering insights into the underlying market strength. It includes configurable periods and multipliers for both fast and slow MoneyFlow.
Vertical Positioning: The script allows users to adjust the vertical position of MoneyFlow plots to maintain a clear and uncluttered chart.
Stochastic RSI:
Stochastic RSI Levels: This combines the RSI and Stochastic indicators to provide a momentum oscillator that is sensitive to price changes. It is used to identify overbought and oversold conditions within a specified period.
Customizable Levels: Traders can set specific levels for more precise analysis.
//How It Works//
The script integrates these indicators through advanced algorithms, creating a synergistic effect that enhances market analysis. Here’s a detailed explanation of the underlying concepts and calculations:
WaveTrend Indicator:
Calculation: WaveTrend is based on the typical price (average of high, low, and close) smoothed over a specified channel length. WT1 and WT2 are derived from this typical price and further smoothed using the Average Channel Length. The difference between WT1 and WT2 indicates momentum, helping to identify cyclical market trends.
RSI (Relative Strength Index):
Calculation: RSI calculates the average gains and losses over a specified period to measure the speed and change of price movements. It oscillates between 0 and 100, with levels set to identify overbought (>70) and oversold (<30) conditions.
MoneyFlow Indicator:
Calculation: MoneyFlow is derived by multiplying price changes by volume and smoothing the results over specified periods. Fast MoneyFlow reacts quickly to price changes, while Slow MoneyFlow offers a broader view of capital movement trends.
Stochastic RSI:
Calculation: Stochastic RSI is computed by applying the Stochastic formula to RSI values, which highlights the RSI’s relative position within its range over a given period. This helps in identifying momentum shifts more precisely.
//How to Use the Script//
Display Settings:
Users can enable or disable various components like WaveTrend OB & OS levels, MoneyFlow plots, and divergence alerts through checkboxes.
Example: Turn on "Show Major Divergence" to see major bullish and bearish divergence signals directly on the chart.
Adjust Channel Settings:
Customize the data source, channel length, and smoothing periods in the "WaveTrend Channel SETTINGS" group.
Example: Set the "Channel Length" to 10 for a more responsive WaveTrend line or adjust the "Average Channel Length" to 21 for smoother trends.
Set Overbought & Oversold Levels:
Configure levels for WaveTrend, RSI, and Stochastic RSI in their respective settings groups.
Example: Set the WaveTrend Overbought Level to 60 and Oversold Level to -60 to define critical thresholds.
Money Flow Settings:
Adjust the periods and multipliers for Fast and Slow MoneyFlow indicators, and set their vertical positions for better visualization.
Example: Set the Fast Money Flow Period to 9 and Slow Money Flow Period to 12 to capture both short-term and long-term capital movements.
//Justification for Combining Indicators//
Enhanced Market Analysis:
Combining WaveTrend, RSI, and MoneyFlow provides a more comprehensive view of market conditions. Each indicator brings a unique perspective, making the analysis more robust.
WaveTrend identifies cyclical trends, RSI measures momentum, and MoneyFlow tracks capital movement. Together, they provide a multi-dimensional analysis of the market.
Improved Decision-Making:
By integrating these indicators, the script helps traders make more informed decisions. For example, a bullish divergence detected by WaveTrend might be validated by an RSI moving out of oversold territory and supported by increasing MoneyFlow.
Customization and Flexibility:
The script offers extensive customization options, allowing traders to tailor it to their specific needs and strategies. This flexibility makes it suitable for different trading styles and timeframes.
//Conclusion//
The indicator stands out due to its innovative combination of WaveTrend, RSI, and MoneyFlow indicators, offering a well-rounded tool for market analysis. By understanding how each component works and how they complement each other, traders can leverage this script to enhance their market analysis and trading strategies, making more informed and confident decisions.
Remember to always backtest the indicator first before implying it to your strategy.
RSI Screener / Heatmap - By LeviathanThis script allows you to quickly scan the market by displaying the RSI values of up to 280 tickers at once and visualizing them in an easy-to-understand format using labels with heatmap coloring.
📊 Source
The script can display the RSI from a custom timeframe (MTF) and custom length for the following data:
- Price
- OBV (On Balance Volume)
- Open Interest (for crypto tickers)
📋 Ticker Selection
This script uses a different approach for selecting tickers. Instead of inputting them one by one via input.symbol(), you can now copy-paste or edit a list of tickers in the text area window. This approach allows users to easily exchange ticker lists between each other and, for example, create multiple lists of tickers by sector, market cap, etc., and easily input them into the script. Full credit to @allanster for his functions for extracting tickers from the text. Users can switch between 7 groups of 40 tickers each, totaling 280 tickers.
🖥️ Display Types
- Screener with Labels: Each ticker has its own color-coded label located at its RSI value.
- Group Average RSI: A standard RSI plot that displays the average RSI of all tickers in the group.
- RSI Heatmap (coming soon): Color-coded rows displaying current and historical values of tickers.
- RSI Divergence Heatmap (coming soon): Color-coded rows displaying current and historical regular/hidden bullish/bearish divergences for tickers.
🎨 Appearance
Appearance is fully customizable via user inputs, allowing you to change heatmap/gradient colors, zone coloring, and more.
Advanced RSI [CryptoSea]The Advanced RSI Duration (ARSI) is a unique tool crafted to deepen your market insights by focusing on the duration the Relative Strength Index (RSI) spends above or below key thresholds. This innovative approach is designed to help traders anticipate potential market reversals by observing sustained overbought and oversold conditions.
Core Feature
Duration Monitoring ARSI's standout feature is its ability to track how long the RSI remains in overbought (>70) or oversold (<30) conditions. By quantifying these durations, traders can gauge the strength of current market trends and the likelihood of reversals.
Enhanced Functionality
Multi-Timeframe Flexibility : Analyze the RSI duration from any selected timeframe on your current chart, offering a layered view of market dynamics.
Customizable Alerts : Receive notifications when the RSI maintains its position above or below set levels for an extended period, signaling sustained market pressure.
Visual Customization : Adjust the visual elements, including colors for overbought and oversold durations, to match your analytical style and preferences.
Label Management : Control the frequency of labels marking RSI threshold crossings, ensuring clarity and focus on significant market events.
Settings Overview
RSI Timeframe & Length : Tailor the RSI calculation to fit your analysis, choosing from various timeframes and period lengths.
Threshold Levels : Define what you consider overbought and oversold conditions with customizable upper and lower RSI levels.
Duration Alert Threshold : Set a specific bar count for how long the RSI should remain beyond these thresholds to trigger an alert.
Visualization Options : Choose distinct colors for durations above and below thresholds, and adjust label visibility to suit your charting approach.
Application & Strategy
Use ARSI to identify potential turning points in the market
Trend Exhaustion : Extended periods in overbought or oversold territories may indicate a strong trend but also warn of possible exhaustion and impending reversals.
Comparative Analysis : By evaluating the current duration against historical averages, traders can assess the relative strength of ongoing market conditions.
Strategic Entries/Exits : Utilize duration insights to refine entry and exit points, capitalizing on the predictive nature of prolonged RSI levels.
Alert Conditions
The Advanced RSI (ARSI) offers critical alert mechanisms to aid traders in identifying prolonged market conditions that could lead to actionable trading opportunities. These conditions are designed to alert traders when the RSI remains at extremes longer than typical durations, signaling sustained market behaviors.
Above Upper Level Alert: This alert is triggered when the RSI sustains above the upper threshold (usually 70) for more than the configured duration, indicating strong bullish momentum or potential overbought conditions.
Below Lower Level Alert: Similarly, this alert is activated when the RSI stays below the lower threshold (commonly 30) for an extended period, suggesting significant bearish momentum or potential oversold conditions.
These alerts enable traders to respond swiftly to extend market conditions, enhancing their strategy by providing timely insights into potential trend reversals or continuations.
The Advanced RSI Duration Analysis empowers traders with a nuanced understanding of market states, beyond mere RSI values. It highlights the significance of how long markets remain in extreme conditions, offering a predictive edge in anticipating reversals. Whether you're strategizing entries or preparing for shifts in market momentum, ARSI is your companion for informed trading decisions.
Dual RSI Differential - Strategy [presentTrading]█ Introduction and How it is Different
The Dual RSI Differential Strategy introduces a nuanced approach to market analysis and trading decisions by utilizing two Relative Strength Index (RSI) indicators calculated over different time periods. Unlike traditional strategies that employ a single RSI and may signal premature or delayed entries, this method leverages the differential between a shorter and a longer RSI. This approach pinpoints more precise entry and exit points, providing a refined tool for traders to exploit market conditions effectively, particularly in overbought and oversold scenarios.
Most important: it is a good eductional code for swing trading.
For beginners, this Pine Script provides a complete function that includes crucial elements such as holding days and the option to configure take profit/stop loss settings:
- Hold Days: This feature ensures that trades are not exited too hastily, helping traders to ride out short-term market volatility. It's particularly valuable for swing trading where maintaining positions slightly longer can lead to capturing significant trends.
- TPSL Condition (None by default): This setting allows traders to focus solely on the strategy's robust entry and exit signals without being constrained by preset profit or loss limits. This flexibility is crucial for learning to adjust strategy settings based on personal risk tolerance and market observations.
BTCUSD 6h LS Performance
█ Strategy, How It Works: Detailed Explanation
🔶 RSI Calculation:
The RSI is a momentum oscillator that measures the speed and change of price movements. It is calculated using the formula:
RSI = 100 - (100 / (1 + RS))
Where RS (Relative Strength) = Average Gain of up periods / Average Loss of down periods.
🔶 Dual RSI Setup:
This strategy involves two RSI indicators:
RSI_Short (RSI_21): Calculated over a short period (21 days).
RSI_Long (RSI_42): Calculated over a longer period (42 days).
Differential Calculation:
The strategy focuses on the differential between these two RSIs:
RSI Differential = RSI_Long - RSI_Short
This differential helps to identify when the shorter-term sentiment diverges from longer-term trends, signaling potential trading opportunities.
BTCUSD Local picuture
🔶 Signal Triggers:
Entry Signal: A buy (long) signal is triggered when the RSI Differential exceeds -5, suggesting strengthening short-term momentum. Conversely, a sell (short) signal occurs when the RSI Differential falls below +5, indicating weakening short-term momentum.
Exit Signal: Trades are generally exited when the RSI Differential reverses past these thresholds, indicating a potential momentum shift.
█ Trade Direction
This strategy accommodates various trading preferences by allowing selections among long, short, or both directions, thus enabling traders to capitalize on diverse market movements and volatility.
█ Usage
The Dual RSI Differential Strategy is particularly suited for:
Traders who prefer a systematic approach to capture market trends.
Those who seek to minimize risks associated with rapid and unexpected market movements.
Traders who value strategies that can be finely tuned to different market conditions.
█ Default Settings
- Trading Direction: Both — allows capturing of upward and downward market movements.
- Short RSI Period: 21 days — balances sensitivity to market movements.
- Long RSI Period: 42 days — smoothens out longer-term fluctuations to provide a clearer market trend.
- RSI Difference Level: 5 — minimizes false signals by setting a moderate threshold for action.
Use Hold Days: True — introduces a temporal element to trading strategy, holding positions to potentially enhance outcomes.
- Hold Days: 5 — ensures that trades are not exited too hastily, helping to ride out short-term volatility.
- TPSL Condition: None — enables traders to focus solely on the strategy's entry and exit signals without preset profit or loss limits.
- Take Profit Percentage: 15% — aims for significant market moves to lock in profits.
- Stop Loss Percentage: 10% — safeguards against large losses, essential for long-term capital preservation.
RSI Momentum Waves [Quantigenics]RSI Momentum Waves Indicator
The RSI Momentum Waves Indicator is your intuitive tool for visualizing market strength and trend persistence. It refines the classic RSI by smoothing the data with Exponential Moving Averages (EMAs), which help clear out the noise to give you a more accurate picture of where the market’s heading. The parameters - RSI Period, Smoothing Period, Overbought, Oversold, Upper Neutral Zone, and Lower Neutral Zone - are all adjustable, so you can tailor the indicator to different market conditions or your trading style.
How It Works:
RSI Period (RsiPer): Adjusts how far back the RSI looks to calculate its value, affecting its sensitivity.
Smoothing Period (SmoothPer): Dictates how smooth the EMA lines are, balancing between sensitivity and noise reduction.
Overbought (OBLevel) / Oversold (OSLevel) Levels: Set the thresholds where the market might be too stretched in either direction and due for a reversal.
Neutral Zones (UpperNZ / LowerNZ): Define the areas where the market is considered neutral, and trend strength is less clear.
Trading Instructions:
Use the RSI Momentum Waves to gain insights into the market’s momentum and make informed decisions:
For Trend Identification: If the waves are consistently above the 50 line and climbing, the market may be bullish; if below and declining, bearish signals are suggested.
Overbought and Oversold Regions: Entering these areas might indicate a potential reversal. A peak and downturn in the overbought region can signal a sell, while a trough and upturn in the oversold region can indicate a buy.
Neutral Zone Caution: In the neutral zones, exercise caution and wait for a breakout in either direction for stronger signals.
Confirm with Other Analysis: Never rely solely on one indicator. Confirm the RSI Momentum Waves signals with other technical indicators or fundamental analysis for best practices.
Remember, the goal is to detect the rhythm of the market’s momentum and act accordingly. Happy trading!
Kalman Hull RSI [BackQuant]Kalman Hull RSI
At its core, this indicator uses a Kalman filter of price, put inside of a hull moving average function (replacing the weighted moving averages) and then using that as a price source for the the RSI, very similar to the Kalman Hull Supertrend just processing price for a different indicator.
This also allows it to make it more adaptive to price and also sensitive to recent price action. This indicator is also mainly built for trend-following systems
PLEASE Read the following, knowing what an indicator does at its core before adding it into a system is pivotal. The core concepts can allow you to include it in a logical and sound manner.
1. What is a Kalman Filter
The Kalman Filter is an algorithm renowned for its efficiency in estimating the states of a linear dynamic system amidst noisy data. It excels in real-time data processing, making it indispensable in fields requiring precise and adaptive filtering, such as aerospace, robotics, and financial market analysis. By leveraging its predictive capabilities, traders can significantly enhance their market analysis, particularly in estimating price movements more accurately.
If you would like this on its own, with a more in-depth description please see our Kalman Price Filter.
OR our Kalman Hull Supertrend
2. Hull Moving Average (HMA) and Its Core Calculation
The Hull Moving Average (HMA) improves on traditional moving averages by combining the Weighted Moving Average's (WMA) smoothness and reduced lag. Its core calculation involves taking the WMA of the data set and doubling it, then subtracting the WMA of the full period, followed by applying another WMA on the result over the square root of the period's length. This methodology yields a smoother and more responsive moving average, particularly useful for identifying market trends more rapidly.
3. Combining Kalman Filter with HMA
The innovative combination of the Kalman Filter with the Hull Moving Average (KHMA) offers a unique approach to smoothing price data. By applying the Kalman Filter to the price source before its incorporation into the HMA formula, we enhance the adaptiveness and responsiveness of the moving average. This adaptive smoothing method reduces noise more effectively and adjusts more swiftly to price changes, providing traders with clearer signals for market entries or exits.
The calculation is like so:
KHMA(_src, _length) =>
f_kalman(2 * f_kalman(_src, _length / 2) - f_kalman(_src, _length), math.round(math.sqrt(_length)))
Use Case
The Kalman Hull RSI is particularly suited for traders who require a highly adaptive indicator that can respond to rapid market changes without the excessive noise associated with typical RSI calculations. It can be effectively used in markets with high volatility where traditional indicators might lag or produce misleading signals.
Application in a Trading System
The Kalman Hull RSI is versatile in application, suitable for:
Trend Identification: Quickly identify potential reversals or confirmations of existing trends.
Overbought/Oversold Conditions: Utilize the dynamic RSI thresholds to pinpoint potential entry and exit points, adapting to current market conditions.
Risk Management: Enhance trading strategies by integrating a more reliable measure of momentum, which can lead to improved stop-loss placements and exit strategies.
Core Calculations and Benefits
Dynamic State Estimation: By applying the Kalman Filter, the indicator continually adjusts its calculations based on incoming price data, providing a real-time, smoothed response to price movements.
Reduced Lag: The integration with HMA significantly reduces lag, offering quicker responses to price changes than traditional moving averages or RSI alone.
Increased Accuracy: The dual filtering effect minimizes the impact of price spikes and noise, leading to more accurate signaling for trades.
Thus following all of the key points here are some sample backtests on the 1D Chart
Disclaimer: Backtests are based off past results, and are not indicative of the future.
INDEX:BTCUSD
INDEX:ETHUSD
BINANCE:SOLUSD
Support Resistance base Volume RSIThe indicator displays support and resistance levels based on volume and the Relative Strength Index (RSI).
Variable and Input Assignment:
lookback: Determines the period for data lookback.
RsiVisible, RsilabelSize, OversoldForRsi, OverboughtForRsi: Various inputs to adjust RSI indicator parameters.
Indicator Calculation:
highestVol: Finds the highest volume within a certain period.
Rsi: Calculates the RSI value with a period of 14.
roc: Calculates the Rate of Change.
Support and Resistance Level Determination:
Uses a comparison between price change (roc) and RSI value to determine whether the price is rising or falling.
If the price is rising and the current volume is greater than the previous highest volume, a new resistance level is established.
If the price is falling and the current volume is greater than the previous highest volume, a new support level is established.
Support and Resistance Lines:
Creates lines indicating the latest support and resistance levels.
These lines are updated whenever there is a change in support or resistance levels.
RSI Labels:
Displays the RSI value above or below the price chart depending on whether the RSI is above or below the overbought or oversold levels.
If the RSI value is above the overbought level, the label is displayed above the price.
If the RSI value is below the oversold level, the label is displayed below the price.
Labels are removed if the corresponding conditions are not met.
Additional RSI Label:
Adds an additional label displaying the RSI value next to the price chart on the last bar.
The main purpose of this script is to assist traders in identifying support and resistance levels based on price movement, volume, and the RSI indicator. Thus, traders can use this information to make better trading decisions.
Multi Timeframe RSI Buy Sell Strategy [TradeDots]The "Multi Timeframe RSI Buy/Sell Strategy" is a trading strategy that utilizes Relative Strength Index (RSI) indicators from multiple timeframes to provide buy and sell signals.
This strategy allows for extensive customization, supporting up to three distinct RSIs, each configurable with its own timeframe, length, and data source.
HOW DOES IT WORK
This strategy integrates up to three RSIs, each selectable from different timeframes and customizable in terms of length and source. Users have the flexibility to define the number of active RSIs. These selections visualize as plotted lines on the chart, enhancing interpretability.
Users can also manage the moving average of the selected RSI lines. When multiple RSIs are active, the moving average is calculated based on these active lines' average value.
The color intensity of the moving average line changes as it approaches predefined buying or selling thresholds, alerting users to potential signal generation.
A buy or sell signal is generated when all active RSI lines simultaneously cross their respective threshold lines. Concurrently, a label will appear on the chart to signify the order placement.
For those preferring not to display order information or activate the strategy, an "Enable backtest" option is provided in the settings for toggling activation.
APPLICATION
The strategy leverages multiple RSIs to detect extreme market conditions across various timeframes without the need for manual timeframe switching.
This feature is invaluable for identifying divergences across timeframes, such as detecting potential short-term reversals within broader trends, thereby aiding traders in making better trading decisions and potentially avoiding losses.
DEFAULT SETUP
Commission: 0.01%
Initial Capital: $10,000
Equity per Trade: 60%
RISK DISCLAIMER
Trading entails substantial risk, and most day traders incur losses. All content, tools, scripts, articles, and education provided by TradeDots serve purely informational and educational purposes. Past performances are not definitive predictors of future results.
TradeDots Stochastic Z-Score
RSI and MACD Composite ScoreComponents of the Indicator
RSI Settings:
The RSI is set with a length parameter, which can be adjusted by the user but defaults to 14. This measures the speed and change of price movements.
MACD Settings:
The MACD is composed of two lines: the MACD line and the signal line, which are calculated from exponential moving averages (EMAs) of different lengths (fast and slow). The default settings are 9 for the fast length, 26 for the slow length, and 3 for the signal length.
The MACD histogram, which is the difference between the MACD line and the signal line, is also calculated.
Normalization and Combination
RSI Normalization : The RSI values are normalized around 0 by subtracting 50 from the RSI and then dividing by 50. This scaling adjusts the RSI to fluctuate around 0, where positive values indicate strength and negative values indicate weakness relative to the median RSI value of 50.
MACD Normalization : The MACD histogram is normalized by dividing it by the highest absolute value of the histogram over the slow length period. This adjustment scales the MACD histogram to fall between -1 and 1, making it comparable in magnitude to the normalized RSI.
Composite Score Calculation
The composite score is simply the sum of the normalized RSI and the normalized MACD histogram. This results in a combined score that reflects both momentum (from RSI) and trend (from MACD), providing a multifaceted view of market dynamics.
Visualization
The composite score is plotted as an oscillator, with a horizontal zero line that helps identify when the score shifts from positive to negative or vice versa.
The background color changes based on the trend: green if the composite score is above zero (bullish trend) and red if below zero (bearish trend).
RSI, STOCHASTIC RSI AND MFI COMBOCombining the Relative Strength Index (RSI), Stochastic RSI (StochRSI), and Money Flow Index (MFI) can provide traders with a comprehensive approach to analyze market momentum, overbought/oversold conditions, and money flow. Each indicator offers unique insights, and their combination can help confirm trading signals and filter out false signals. Let's delve into each indicator and then discuss how they can be used together:
Relative Strength Index (RSI) 14: DA BLUE LINE
The RSI is a momentum oscillator that measures the speed and change of price movements. It oscillates between 0 and 100 and is typically used to identify overbought (>70) and oversold (<30) conditions. A reading above 70 may indicate that an asset is overbought and could be due for a pullback, while a reading below 30 may suggest that an asset is oversold and could be due for a bounce.
Stochastic RSI (StochRSI) 14: DA RED LINE
The StochRSI is an oscillator that combines the features of both the Stochastic Oscillator and RSI. It measures the relative position of the RSI within its range over a specific period (e.g., 14 periods). Like the RSI, the StochRSI oscillates between 0 and 100 and is used to identify overbought and oversold conditions. Typically:
A StochRSI above 0.8 may suggest overbought conditions.
A StochRSI below 0.2 may indicate oversold conditions.
Money Flow Index (MFI) 14: DA PURPLE LINE
The MFI is a momentum oscillator that measures the inflow and outflow of money into an asset over a specific period (e.g., 14 periods). It oscillates between 0 and 100 and is used to identify overbought and oversold conditions based on both price and volume. Generally:
An MFI above 80 may indicate overbought conditions.
An MFI below 20 may suggest oversold conditions.
Combining RSI, StochRSI, and MFI:
When combining RSI, StochRSI, and MFI, traders can use the following approach to analyze the market:
Identify Overbought/Oversold Conditions:
Look for confluence between RSI, StochRSI, and MFI readings to identify overbought and oversold conditions.
For example, if RSI > 70, StochRSI > 0.8, and MFI > 80, it may suggest a strong overbought condition, potentially indicating a reversal or pullback.
Confirm Trend Strength:
Use the RSI, StochRSI, and MFI to confirm the strength of a trend.
A rising trend with RSI, StochRSI, and MFI above 50 may suggest strong bullish momentum, while a falling trend with readings below 50 may indicate strong bearish momentum.
Divergence Analysis:
Look for divergences between price and RSI, StochRSI, or MFI to identify potential trend reversals.
For example, if the price makes a higher high, but RSI, StochRSI, or MFI makes a lower high (bearish divergence), it may suggest weakening bullish momentum and potential downside.
Combining RSI, StochRSI, and MFI can offer traders a more holistic view of market momentum, overbought/oversold conditions, and money flow. Backtest it let me know your success.
Market Structure RSIDescription:
The Market Structure RSI is an innovative indicator that combines the power of the Relative Strength Index (RSI) with market structure analysis to provide a unique perspective on the market. This indicator helps traders identify potential trend reversals and trading opportunities by analyzing the underlying market structure and generating overbought and oversold signals.
Key Features:
RSI Calculation: The indicator calculates a custom RSI based on the market structure, taking into account the formation of higher highs and lower lows. This unique approach to RSI calculation provides a more accurate representation of the market's strength and weakness.
Overbought and Oversold Levels: Users can customize the overbought and oversold levels according to their preferences. When the Market Structure RSI crosses above the oversold level, it generates a bullish signal, suggesting a potential long entry. Conversely, when the RSI crosses below the overbought level, it generates a bearish signal, indicating a potential short entry.
Moving Average: The indicator includes an optional moving average of the Market Structure RSI, which can be used to smooth out the RSI line and provide additional confirmation of trend reversals. Users can choose between EMA, SMA, and WMA and adjust the length of the moving average.
Customizable Close Type: The indicator allows users to define whether the market structure is deemed broken based on the candle close or the candle high/low. This flexibility enables traders to adapt the indicator to their preferred trading style and market conditions.
Visual Enhancements: The Market Structure RSI features gradient fills between the RSI line and the overbought/oversold levels, providing a clear visual representation of the market's strength. Additionally, the indicator plots bullish and bearish signals as circles on the RSI line, making it easy to identify potential entry points.
How to Use:
Add the Market Structure RSI to your chart and customize the settings according to your preferences, such as the RSI length, overbought and oversold levels, and moving average type and length.
Monitor the Market Structure RSI for crossovers above the oversold level or below the overbought level. A bullish signal occurs when the RSI crosses above the oversold level, while a bearish signal occurs when the RSI crosses below the overbought level.
Use the signals generated by the Market Structure RSI in conjunction with other technical analysis tools and price action patterns to confirm potential trade entries. The indicator works well as a complementary tool to support your existing trading strategy.
Consider the overall trend and market context when interpreting the signals generated by the Market Structure RSI. The indicator is most effective in trending markets and may produce less reliable signals in choppy or ranging market conditions.
Utilize sound risk management principles, such as setting appropriate stop-loss and take-profit levels, when trading based on the Market Structure RSI signals.
The Market Structure RSI offers a fresh perspective on the classic RSI indicator by incorporating market structure analysis. By combining the power of RSI with the identification of higher highs and lower lows, this indicator provides traders with a valuable tool for identifying potential trend reversals and trading opportunities. Whether you are a seasoned trader or just starting out, the Market Structure RSI can be a valuable addition to your technical analysis toolkit.
RSI Multi Strategies With Overlay SignalsHello everyone,
In this indicator, you will find 6 different entry and exit signals based on the RSI :
Entry into overbought and oversold zones
Exit from overbought and oversold zones
Crossing the 50 level
RSI cross RSI MA below or above the 50 level
RSI cross RSI MA in the overbought or oversold zones
RSI Divergence
With the signals identified, you can create your own strategy . (If you have any suggestions, please mention them in the comments).
Beyond these signals, you can set SL (Stop Loss) and TP (Take Profit) levels to better manage your positions.
SL Methods:
Percentage: The stop loss is determined by the percentage you specify.
ATR : The stop level is determined based on the Average True Range (ATR).
TP Methods:
Percentage: The take profit is determined by the percentage you specify.
RR ( Risk Reward ): The take profit level is determined based on the distance from the stop level.
You can mix and match these options as you like.
What makes the indicator unique and effective is its ability to display the RSI in the bottom chart and the signals, SL (Stop Loss), and TP (Take Profit) levels in the overlay chart simultaneously. This feature allows you to manage your trading quickly and easily without the need for using two separate indicators.
Let's try out a few strategies together.
My entry signal: RSI Entered OS (Oversold) Zone
My exit signal: RSI Entered OB (Overbought) Zone
I'm not using a stoploss for this strategy ("Fortune favors the brave").
Let's keep ourselves safe by adding a stop loss.
I'm adding an ATR-based stop loss.
I think it's better now.
If you have any questions or suggestions about the indicator, you can contact me.
Cheers
RSI Confirm Trend with Williams (W%R)RSI Confirm Trend with Williams (W%R)
This is the "RSI Confirm Trend with Williams (W%R)" indicator
This is a modification of the "RSI Trends" indicator by zzzcrypto123.
What Is the Relative Strength Index (RSI)?
The relative strength index (RSI) is a momentum indicator used in technical analysis. RSI measures the speed and magnitude of a security's recent price changes to evaluate overvalued or undervalued conditions in the price of that security.
What is Williams %R?
Williams %R, also known as the Williams Percent Range, is a type of momentum indicator that moves between 0 and -100 and measures overbought and oversold levels. The Williams %R may be used to find entry and exit points in the market. The indicator is very similar to the Stochastic oscillator and is used in the same way. It was developed by Larry Williams and it compares a stock’s closing price to the high-low range over a specific period, typically 14 days or periods.
How Does "RSI Confirm Trend with Williams (W%R)" work?
This indicator combines the momentum of both RSI and Williams %R by adding upper and lower thresholds. When the thresholds are broken, this indicator changes color from gray to either green or red.
What Are The Thresholds?
The default RSI thresholds are 55 and 45. These values are configurable.
The default Williams %R thresholds are 80 and 20. These values are configurable and made positive so it can be plotted against the RSI line.
How To Use?
When the RSI exceeded the upper/lower thresholds, the RSI line color will change from gray to lighter green/red color.
When the Williams %R exceeded the upper/lower thresholds, the RSI color will change to darker green/red color signifying a strong momentum in that direction.
When the RSI color is gray, this means the RSI and Williams %R thresholds are not broken which can also signify as no trend or consolidation.
The Williams %R line is not displayed by default but can be enabled using the checkbox provided in the Style tab.
This "RSI Confirm Trend with Williams (W%R)" indicator can be combined with other technical indicators to verify the idea behind this theory.
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Disclaimer
The information contained in this indicator does not constitute any financial advice or a solicitation to buy or sell any securities of any type.
My scripts/indicators/ideas are for educational purposes only!
RSI AcceleratorThe Relative Strength Index (RSI) is like a fitness tracker for the underlying time series. It measures how overbought or oversold an asset is, which is kinda like saying how tired or energized it is.
When the RSI goes too high, it suggests the asset might be tired and due for a rest, so it could be a sign it's gonna drop. On the flip side, when the RSI goes too low, it's like the asset is pumped up and ready to go, so it might be a sign it's gonna bounce back up. Basically, it helps traders figure out if a stock is worn out or revved up, which can be handy for making decisions about buying or selling.
The RSI Accelerator takes the difference between a short-term RSI(5) and a longer-term RSI(14) to detect short-term movements. When the short-term RSI rises more than the long-term RSI, it typically refers to a short-term upside acceleration.
The conditions of the signals through the RSI Accelerator are as follows:
* A bullish signal is generated whenever the Accelerator surpasses -20 after having been below it.
* A bearish signal is generated whenever the Accelerator breaks 20 after having been above it.
Volume RSIRelative strength index based on volume data.
Indicate volume momentum, and help you define divergences on volume.
The goal is to have an idea and represent in another form volumes and kept eyes on volume momentum on a certain period.
RSI is an indicator about the strength, I keep the oversold/overbought thresholds. I think it still makes sense to interpret.
the calculations is simple, we use the average volume up (avg_vol_up) and average volume down (avg_vol_down) over the period.
then calculate the relatives strength : ( avg_vol_up / ( avg_vol_up + avg_vol_down ) ) * 100
The period is 14 by default. The period is used for calculating mean.
I also add MA it helps to have a global look on the indicator.
In my code I used the idea of @Padronhosnai in his code "positve/negative volume" to get volumes in the right form.
For pictures I also use his indicator it's the one above.
RS Rating for Indian MarketRS Rating for Trading View
This Trading View script calculates the Relative Price Strength (RS) Rating for a given stock. It's a measure of a stock's price performance over the last twelve months, compared to all stocks in a selected Index. The rating scale ranges from 1 (lowest) to 99 (highest).
Features
- Adaptation for Indian Market
- Option to choose the index to compare to (NSE:NIFTY, NSE:CNX500, NSE:NIFTYSMLCAP250, NSE:CNXSMALLCAP)
- Option to compare to a different index
- Option to hide the RS rating
- Option to plot RS new highs
- Option to adjust the offset of the line for display purposes
- Option to change the color of the RS Line & Rating
- Option to change the color of the dots for RS new highs
- Option to choose which new high to plot (RS New Highs, RS New Highs Before Price, Historical RS New Highs, Historical RS New Highs Before Price)
- Option to adjust the recent high look-back count
Please note that the script is designed to work best in the daily timeframe. Results may not be accurate in other timeframes.
This script uses three methods to calculate the RS Rating:
1. A method that calculates how the stock behaves vs SMA.
2. A classic performance method that calculates the performance of the stock's closing price vs the closing price 3 months back.
3. A method that measures how the stock performs against the comparative Symbol.
The final RS Rating is a combination of the results from these three methods. The script also includes some adjustments based on observations to improve the accuracy of the rating.
RSI Overbought/Oversold [Overlay Highlighter]Indicator to show when the RSI is in oversold(Below 30) or overbought (Above 70) conditions. The background color of the chart changes colors in the areas where the above conditions are met.
Price can often reverse in these areas. However, this depends on the strength of the trend and price may continue higher or lower in the direction of the overall trend.
Divergence has been added to aid the user in timing reversals. Divergences are plotted by circles above or below the candles. Divergence is confirmed so there is a delay of one candle before the signal is given on the previous candle. Again, everything depends on the strength of the trend so use proper risk management.
Once the RSI has entered into oversold/overbought conditions, it is recommended to wait for divergence before entering into the trade near areas of support or resistance. It is recommended to utilize this strategy on the H4 timeframe, however, this particular strategy works on all timeframes.
This indicator is a modified version of seoco's RSI Overbought/Oversold + Divergence Indicator . The user interface has been refined, is now overlayed on the chart, and my own divergence code has been inserted.
UT Bot Stochastic RSIUT Bot Stochastic RSI is a powerful trading tool designed to help traders identify potential buy and sell signals in the market. This indicator combines the Stochastic and RSI (Relative Strength Index) oscillators, two of the most popular and effective technical analysis tools, to provide a comprehensive view of market conditions.
The Stochastic oscillator is a momentum indicator that compares a security's closing price to its price range over a given time period. The RSI, on the other hand, is a momentum oscillator that measures the speed and change of price movements. By combining these two indicators, the UT Bot Stochastic RSI can help traders identify overbought and oversold conditions, as well as potential trend reversals.
The UT Bot Stochastic RSI also includes an ATR (Average True Range) trailing stop, which can be used to set stop-loss levels and manage risk. This feature is particularly useful in volatile markets, where price movements can be large and unpredictable.
In addition to its powerful technical analysis tools, the UT Bot Stochastic RSI also includes a backtesting feature, allowing traders to test their strategies on historical data. This can help traders identify the most effective settings for the indicator and improve their trading performance.
Overall, the UT Bot Stochastic RSI is a versatile and effective tool for traders of all levels, providing valuable insights into market conditions and helping to improve trading decisions
RSI Order Blocks [UAlgo]The "RSI Order Blocks " identifies and visualizes potential order blocks based on the Relative Strength Index (RSI) indicator. These zones may indicating potential support or resistance levels.
🔶 Key Features :
RSI-based Order Block Identification: The script utilizes the RSI indicator to identify potential order blocks. It detects pivot highs and lows in the RSI, which are indicative of potential reversal points, and marks these areas as potential order blocks.
Order Block Visualization: Identified order blocks are visually represented on the chart, making it easy for traders to recognize and interpret these significant price zones. Both bullish and bearish order blocks are differentiated by color, enhancing clarity and ease of analysis. Additionally, within each order block, the RSI value of that block is also shown.
RSI Overbought/Oversold Filter: Optionally, users can apply a filter based on RSI levels to refine the detection of order blocks. This filter prevents the creation of order blocks when the RSI is within specified overbought or oversold conditions (default between 30 and 70), helping traders focus on areas of potentially significant price action.
An Example with the OB/OS Filter Feature Turned Off:
An Example with the OB/OS Filter Feature Turned On:
Mitigation of Broken Order Blocks: Provides flexibility in selecting the mitigation method (based on close or wick) for determining order block breaches.
Customizable Parameters: The script offers a range of customizable parameters to tailor the detection and visualization of order blocks to suit individual trading preferences. Users can adjust parameters such as RSI Length, Order Block Detection Sensitivity, Mitigation Method, and order block style to fine-tune the analysis according to their trading strategy.
🔶 Disclaimer :
Not Financial Advice: This indicator is intended for educational and informational purposes only. It does not constitute financial advice or recommendations to buy, sell, or hold any financial instruments.
Use at Own Risk: Trading involves substantial risk of loss and is not suitable for all investors. Users of this indicator should exercise caution and conduct their own research and analysis before making any trading decisions.
Performance Not Guaranteed: Past performance is not indicative of future results. While the indicator aims to assist traders in analyzing market trends, there is no guarantee of accuracy or success in trading operations.
DEMA RSI Overlay [BackQuant]DEMA RSI Overlay
PLEASE Read the following, knowing what an indicator does at its core before adding it into a system is pivotal. The core concepts can allow you to include it in a logical and sound manner.
Anyways,
BackQuant's new trading indicator that blends the Double Exponential Moving Average (DEMA) with the Relative Strength Index (RSI) to create a unique overlay on the trading chart. This combination is not arbitrary; both the DEMA and RSI are revered for their distinct advantages in trading strategy development. Let's delve into the core components of this script, the rationale behind choosing DEMA and RSI, the logic of long and short signals, and its practical trading applications.
Understanding DEMA
DEMA is an enhanced version of the conventional exponential moving average that aims to reduce the lag inherent in traditional averages. It does this by applying more weight to recent prices. The reduction in lag makes DEMA an excellent tool for tracking price trends more closely. In the context of this script, DEMA serves as the foundation for the RSI calculation, offering a smoother and more responsive signal line that can provide clearer trend indications.
Why DEMA?
DEMA is chosen for its responsiveness to price changes. This characteristic is particularly beneficial in fast-moving markets where entering and exiting positions quickly is crucial. By using DEMA as the price source, the script ensures that the signals generated are timely and reflective of the current market conditions, reducing the risk of entering or exiting a trade based on outdated information.
Integrating RSI
The RSI, a momentum oscillator, measures the speed and change of price movements. It oscillates between zero and 100 and is typically used to identify overbought or oversold conditions. In this script, the RSI is calculated based on DEMA, which means it inherits the responsiveness of DEMA, allowing traders to spot potential reversals or continuation signals sooner.
Why RSI?
Incorporating RSI offers a measure of price momentum and market conditions relative to past performance. By setting thresholds for long (buy) and short (sell) signals, the script uses RSI to identify potential turning points in the market, providing traders with strategic entry and exit points.
Calculating Long and Short Signals
Long Signals : These are generated when the RSI of the DEMA crosses above the longThreshold (set at 70 by default) and the closing price is not above the upper volatility band. This suggests that the asset is gaining upward momentum while not being excessively overbought, presenting a potentially favorable buying opportunity.
Short Signals : Generated when the RSI of the DEMA falls below the shortThreshold (set at 55 by default). This indicates that the asset may be losing momentum or entering a downtrend, signaling a possible selling or shorting opportunity.
Logical Soundness
The logic of combining DEMA with RSI for generating trade signals is sound for several reasons:
Timeliness : The use of DEMA ensures that the price source for RSI calculation is up-to-date, making the momentum signals more relevant.
Balance : By setting distinct thresholds for long and short signals, the script balances sensitivity and specificity, aiming to minimize false signals while capturing genuine market movements.
Adaptability : The inclusion of user inputs for periods and thresholds allows traders to customize the indicator to fit various trading styles and timeframes.
Trading Use-Cases
This DEMA RSI Overlay indicator is versatile and can be applied across different markets and timeframes. Its primary use-cases include:
Trend Following: Traders can use it to identify the start of a new trend or the continuation of an existing trend.
Swing Trading: The indicator's sensitivity to price changes makes it ideal for swing traders looking to capitalize on short to medium-term price movements.
Risk Management: By providing clear long and short signals, it helps traders manage their positions more effectively, potentially reducing the risk of significant losses.
Final Note
We have also decided to add in the option of standard deviation bands, calculated on the DEMA, this can be used as a point of confluence rendering trading ranges. Expanding when volatility is high and compressing when it is low.
For example:
This provides the user with a 1, 2, 3 standard deviation band of the DEMA.
Thus following all of the key points here are some sample backtests on the 1D Chart
Disclaimer: Backtests are based off past results, and are not indicative of the future.
INDEX:BTCUSD
INDEX:ETHUSD
BINANCE:SOLUSD
