Red & Green Zone Reversal

Overview

The “Red & Green Zone Reversal” indicator is designed to visually highlight potential reversal zones on your chart by using a combination of Bollinger Bands and the Relative Strength Index (RSI).

It overlays on the chart and provides background color cues—red for oversold conditions and green for overbought conditions—along with corresponding alert triggers.

Key Components

Overlay: The indicator is set to overlay the chart, meaning its visual cues (colored backgrounds) are drawn directly on the price chart.

Bollinger Bands Calculation


Period: A 20-period simple moving average (SMA) is calculated from the closing prices.
Standard Deviation Multiplier: A multiplier of 2.0 is applied.

Bands Defined:
Basis: The 20-period SMA.
Deviation: Calculated as 2 times the standard deviation over the same period.
Upper Band: Basis plus the deviation.
Lower Band: Basis minus the deviation.

RSI Calculation

Period: The RSI is computed over a 14-period span using the closing prices.
Thresholds:

Oversold Threshold: 30 (used for the red zone condition).
Overbought Threshold: 70 (used for the green zone condition).
Zone Conditions

Red Zone (Oversold):

Criteria: The price is below the lower Bollinger Band and the RSI is below 30.
Purpose: Highlights a situation where the asset may be deeply oversold, signaling a potential reversal to the upside.

Green Zone (Overbought):
Criteria: The price is above the upper Bollinger Band and the RSI is above 70.
Purpose: Indicates that the asset may be overbought, potentially signaling a reversal to the downside.

Visual and Alert Components

Background Coloring:
Red Background: Applied when the red zone condition is met (using a semi-transparent red).
Green Background: Applied when the green zone condition is met (using a semi-transparent green).

Alerts:
Red Alert: An alert condition titled “Deep Oversold Alert” is triggered with the message “Deep Oversold Signal triggered!” when the red zone criteria are satisfied.

Green Alert: Similarly, an alert condition titled “Deep Overbought Alert” is triggered with the message “Deep Overbought Signal triggered!” when the green zone criteria are met.

Important Disclaimers

Not Financial Advice:
This indicator is provided for informational and analytical purposes only. It does not constitute trading advice or a recommendation to buy or sell any asset. Traders should use it as one of several tools in their analysis and should perform their own due diligence.

Risk Management:
Trading inherently involves risk. Past performance is not indicative of future results. Always implement appropriate risk management and use stop losses where necessary.


Summary
In summary, the “Red & Green Zone Reversal” indicator uses Bollinger Bands and RSI to detect extreme market conditions. It visually marks oversold (red) and overbought (green) conditions directly on the chart and offers alert conditions to help traders monitor these potential reversal points.

Enjoy!!