Delta-RSI Strategy (with filters)

The Delta-RSI Strategy (with filters) tool is a comprehensive momentum-based trading system that utilizes a smoothed time derivative of the RSI to generate entry and exit signals. It provides a robust framework for backtesting by incorporating various filtering criteria—such as volatility, relative volume, and standard RSI levels—to help minimize false signals and refine trade execution.

Usage

The strategy can be configured to execute long positions, short positions, or both. Users can select from three primary trade triggers:

• Zero-crossing: Bullish signals occur when the Delta-RSI crosses above zero; bearish signals occur when it crosses below.
• Signal Line Crossing: Signals are triggered when the Delta-RSI crosses its EMA-based signal line.
• Direction Change: Bullish signals are generated when the Delta-RSI is negative but begins to ascend; bearish signals occur when it is positive and begins to descend.

To enhance performance, users can apply filters to long entries, short entries, or exits:

• Relative Volume: Ensures trades only occur when current volume exceeds a user-defined multiple of the average volume.
• Volatility Filter: Requires the short-term ATR to be greater than the long-term ATR (indicating increasing volatility).
• Overbought/Oversold Filter: Restricts signals to instances where the standard 14-period RSI falls within a specific range.

Details

Delta-RSI is a momentum indicator derived from the local polynomial regression of the Relative Strength Index (RSI). By calculating the time derivative of this smoothed interpolation, the script identifies the rate of change in price momentum more effectively than standard oscillators. The strategy implementation includes a local polynomial interpolation engine that handles various polynomial orders and lookback lengths to adapt to different market cycles.

Settings

Model Parameters

• Polynomial Order: Determines the degree of the local polynomial used to interpolate the RSI data.
• RSI Length: The period used for the underlying RSI calculation.
• Length: The lookback frame size for the local regression calculation.
• Signal Length: The EMA period applied to the Delta-RSI to create the signal line.

Entry and Exit Conditions

• Buy/Sell/Exit Conditions: Dropdown menus to select between Zero-crossing, Signal Line Crossing, or Direction Change for each trade phase.

Filters

• Relative Volume Filter: Includes settings for volume multiplier and the lookback period for average volume.
• Volatility Filter: Includes settings for two ATR lengths to compare relative volatility.
• Overbought/Oversold Filter: Defines the RSI(14) range (minimum and maximum) required for a signal to be valid.

Risk Management

• SL/TP: Options for fixed stop loss and take profit percentages.
• Trailing: Enables trailing functionality for the stop loss.

Backtesting

• Fixed Backtest Period: Allows users to specify start and end dates for the strategy tester.

FAQ

How do I interpret the Delta-RSI value? The Delta-RSI represents the "velocity" of the RSI. A positive value indicates upward momentum, while a negative value indicates downward momentum. Crossings and direction changes signal potential shifts in trend strength.

What is the benefit of the Polynomial Order setting? A higher polynomial order allows the indicator to fit more complex price movements but may increase noise, while a lower order provides more smoothing and identifies broader trends.

How can I access this strategy? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.