Momentum Based RSI

The Momentum Based RSI indicator is a trend-following tool that amplifies the traditional Relative Strength Index with a momentum-based multiplier to provide faster responsiveness to market movements while maintaining signal clarity. By integrating a ratio of two moving averages with the RSI, the script creates a more dynamic oscillator that adapts to the speed of price action.

Usage

The indicator can be used similarly to the standard RSI for trend following or mean-reversion strategies, but with increased sensitivity to emerging trends. Users can monitor the modified RSI line as it interacts with a central threshold or its own moving average.

Examples of usage include:

• Trend Detection: Identifying bullish or bearish shifts when the momentum-adjusted RSI crosses a specific threshold (e.g., 50).
• Crossover Strategies: Using the "RSI-MA Crossover" mode to find entry and exit points based on the interaction between the adjusted RSI and its smoothed moving average.
• Trend Strength: Observing the amplification of the RSI during strong trends, where the MA Ratio increases the oscillator's magnitude.

Details

The script functions by calculating two primary components:

1. MA Ratio: A momentum calculation derived from dividing a "Fast" moving average by a "Slow" moving average. This ratio visualizes the velocity of price relative to its recent average.
2. Relative Strength Index (RSI): A standard calculation of price strength over a defined period.

The final output is the product of these two components: RSI * (Fast MA / Slow MA). During active trends, the MA Ratio shifts away from its baseline, causing the RSI to react more aggressively to price changes. This construction aims to reduce the lag often associated with traditional oscillators without introducing excessive noise.

Settings

Momentum

• Fast MA: The period for the faster moving average used in the momentum ratio.
• Slow MA: The period for the slower moving average used in the momentum ratio. It is recommended to keep this value higher than the Fast MA.
• MA Source: The price source used for moving average calculations (e.g., Close).
• MA Type for MAs: The type of moving average to use (SMA, EMA, Hull, WMA, RMA, or LINREG).

RSI

• RSI Length: The lookback period for the RSI calculation.
• RSI Source: The price source used for the RSI calculation.
• RSI MA: The period for the moving average applied to the resulting Momentum Based RSI.
• Moving Type for RSI MA: The type of moving average used to smooth the final indicator line.

Signal

• Signal Type: Determines the logic for color changes and alerts:
  • Threshold: Based on the RSI crossing the defined threshold level.
  • RSI-MA Crossover: Based on the RSI crossing its own moving average.
  • MA Threshold: Based on the RSI's moving average crossing the threshold.
• RSI Threshold: The level used for threshold-based signals (default is 50).
• Long/Short Color: Customizable colors for bullish and bearish states.
• Show RSI/MA: Toggles the visibility of the primary RSI line and its moving average.

FAQ

How do I interpret the colored bars?

The bar coloring is determined by the selected "Signal Type" in the settings. For example, in "Threshold" mode, green bars indicate the Momentum Based RSI is above the threshold (bullish), while red bars indicate it is below (bearish).

Why does the RSI look different from the standard version?

The values are multiplied by a momentum ratio (Fast MA / Slow MA). This means the values may exceed the standard 0-100 range and will move more rapidly during periods of high momentum.

How can I access Momentum Based RSI?

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