Welles Wilder created the RSI momentum oscillator in the 1970s. It is a momentum oscillator that ranges from 0 to 100. The traditional idea is to buy when the oscillator is below 30 and to sell when it is above 70. However, this strategy often only catches extreme moves and misses majority of the trend.
In comes Constance Brown RSI . She theorized that in an uptrend, the buy zone exists when RSI is between 40 and 50. The sell zone in an uptrend exists between 80 and 90. In a downtrend, the sell zone exists between 55 and 65. The buy zone in a downtrend exists between 20 and 30.
I have added a moving average feature to determine trend. When the short trend is above the long trend, it is considered an uptrend. It is in a downtrend otherwise. Using short length moving averages will often produce a lot of false signals. I recommend using the 50 and 100 as they will produce less noise.
There will be times when the oscillator breaks beyond the ranges described (for ex: seeing a reading below 40 in an uptrend). This tends to happen in periods of high volatility . Refer to the traditional RSI rules in such cases.
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Added an EMA signal line. Buy the crossover from the support zone in an uptrend and sell the crossunder from the resistance zone in a downtrend.
@Ben_1148x2, Thank you! I really appreciate your kind words. Please let me know if I can make it better. Would love to know your thoughts.
Ben_1148x2
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@Decam9, I've got a couple of ideas that might be good to try. I think using SMA to go from uptrend to downtrend, but it might be good to give an option to select EMA, or even an oscillator going from positive to negative. It would be good to be able to adjust the buy/sell RSI thresholds for people that have back tested ranges for specific assets. Some people like info panels that show what price is needed to go from one level to another (I don't use them). Lastly, I really like the way that this one draws divergences and failure swings. That might be a really strong addition to yours. tradingview.com/script/sNZ6Ckh3-RSI-Failure-Swings-AO-Divergences/