OBV/RSI Strategy v3

The OBV/RSI Strategy v3 indicator is a pattern recognition tool that identifies "W" and "M" structural formations across multiple technical oscillators to signal potential market reversals.

Usage

The script is designed to identify specific price action and momentum structures commonly referred to as "Dav-o" patterns. These patterns are characterized by multi-point formations (W-shape for longs and M-shape for shorts) within oscillators like On-Balance Volume (OBV), Relative Strength Index (RSI), or the Williams %R (Willy).

Key usage scenarios include:

• Trend Reversals: Identifying completed W or M patterns which suggest a shift in momentum.
• Confluence Trading: Combining OBV, RSI, and Williams %R to ensure that volume, price velocity, and overbought/oversold levels all align before a signal is plotted.
• Potential Pattern Tracking: Users can enable "Show potential dav-o" to see patterns before they are fully confirmed by the price breaking specific pivot levels.

Details

The indicator functions by scanning a user-defined lookback window (Max. width of W/M) to identify four critical pivot points (A, B, C, and D).

• For a Long (W) pattern: The script looks for a structure where point B is lower than point D. The signal is confirmed (unless in "potential" mode) when the current price exceeds the peak at point C.
• For a Short (M) pattern: The script looks for a structure where point B is higher than point D. The signal is confirmed when the current price drops below the trough at point C.

The script integrates four different filters:

1. OBV: Checks for volume-based trend exhaustion or accumulation.
2. RSI: Standard Relative Strength Index structural analysis.
3. Willy: A variation of the Williams %R oscillator.
4. SMA Filter: An optional price filter requiring the price to be above or below a Moving Average for a specific number of bars to ensure alignment with the broader trend.

Settings

• Max. width of W/M: Determines the maximum number of bars allowed to form the pattern structural points.
• Use OBV: Toggles the inclusion of On-Balance Volume in the pattern detection.
• Use RSI: Toggles the inclusion of the Relative Strength Index in the pattern detection.
• Use Willy: Toggles the inclusion of the Williams %R variation.
• Price above/below SMA: Enables a trend filter based on the Simple Moving Average.
• RSI length: Sets the lookback period for the RSI calculation.
• Willy length: Sets the lookback period for the Williams %R calculation.
• SMA length: Sets the period for the trend filter moving average.
• Show dav-o: Displays confirmed completed patterns on the chart.
• Show potential dav-o: Displays patterns that meet the structural requirements but have not yet satisfied the final confirmation trigger.

FAQ

How do I use the SMA filter effectively?

The SMA filter is used to ensure you are not trading against a strong established trend. When enabled, it requires the price to have stayed on one side of the SMA for several bars before a signal can fire.

What is the difference between a "Potential" and a standard signal?

A standard signal requires the price to break the "neckline" (Point C) of the W or M formation, whereas a potential signal appears as soon as the structural points are identified, even if the breakout hasn't occurred yet.

How can I access OBV/RSI Strategy v3?

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