RSI Divergence Candles V2

The RSI Divergence Candles V2 indicator provides a visual representation of RSI momentum by plotting smoothed dual-period Relative Strength Index (RSI) values as candlestick bars. This tool aims to help traders identify trend direction and momentum expansion or contraction directly within an RSI-based oscillator format.

Usage

The Usage section describes how the script can be used to interpret market conditions through its candlestick representation.

• Trend Direction: When the candles are green, the smoothed Fast RSI is above the smoothed Slow RSI, indicating bullish momentum. Conversely, red candles indicate the Fast RSI is below the Slow RSI, signifying bearish momentum.
• Momentum Intensity: Brightly colored candles (solid green or red) represent "expansion," where the distance between the fast and slow RSI is increasing compared to the previous bar. Faded colors represent "contraction," suggesting that the momentum move might be slowing down.
• Overbought/Oversold: Use the horizontal levels at 70 and 30 to identify potential exhaustion points. The midline at 50 serves as a neutral pivot point.

Details

The indicator calculates two distinct RSI values: a Fast RSI and a Slow RSI. These values are then smoothed using a Simple Moving Average (SMA) to reduce noise. The resulting smoothed values act as the "Open" and "Close" of the RSI candles. The "High" and "Low" of the wicks can be mapped either to the source series or specifically to the highest/lowest RSI values calculated from the price highs and lows, providing a more comprehensive view of the RSI range within a given period.

Settings

• Use high/low series for mapping the wicks?: When enabled, the script uses the RSI of the price high and low to determine candle wicks. When disabled, it uses the standard source series.
• Source Series: The price input used for the RSI calculation (typically 'Close').
• Fast Length: The lookback period for the fast RSI calculation.
• Slow Length: The lookback period for the slow RSI calculation.
• Smooth: The length of the SMA smoothing applied to both the fast and slow RSI values.
• Overbought Level: The threshold used to define the overbought zone (default is 70).
• Oversold Level: The threshold used to define the oversold zone (default is 30).

FAQ

How do I interpret the candle colors?

Bright green candles indicate bullish expansion, while faded green indicates bullish contraction. Bright red candles indicate bearish expansion, while faded red indicates bearish contraction.

What do the wicks represent?

The wicks represent the volatility of the RSI within the period, showing the maximum and minimum RSI values reached, which helps in identifying extreme intraday momentum shifts.

How can I access RSI Divergence Candles V2?

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