RSI Modified

The RSI Modified indicator provides dynamic overbought and oversold levels by utilizing historical pivot points to adapt to changing market trends.

Usage

The Usage section focuses on identifying extreme market conditions using levels that adjust based on the price action's momentum. Unlike the standard RSI which uses static 70 and 30 levels, this tool calculates an average of recent high and low pivots to create adaptive bands.

• Adaptive Zones: When the asset is in a strong uptrend, the dynamic overbought level may rise, preventing premature exit signals. Conversely, in a downtrend, the oversold level may shift to reflect the prevailing bearish sentiment.
• Trend Visualization: The script retains the original 70/30 levels. If the dynamic bands stay consistently above or below these static levels, it provides a visual confirmation of the current trend direction.
• Pivot Markers: Crosses on the oscillator indicate where a pivot was detected and added to the internal calculation array. These serve as a reference for how the dynamic levels are being formed.

Details

The script functions by tracking RSI pivot points over a user-defined lookback period. It filters these pivots based on "Upper" and "Lower" limits (e.g., only pivots above 60 are considered for the overbought average). By storing these values in an array and calculating their average, the indicator produces a smoothed, trend-responsive boundary. This implementation addresses the limitation of static oscillators in trending markets, where price often stays "overbought" or "oversold" for extended periods.

Settings

RSI Settings

• RSI Length: The lookback period for the standard RSI calculation.
• Source: The price data used for the RSI (typically "Close").
• Overbought: The static upper boundary (default 70).
• Oversold: The static lower boundary (default 30).

MA Settings

• MA Type: Select the type of moving average to apply to the RSI (SMA, EMA, Bollinger Bands, etc.).
• MA Length: The lookback period for the RSI moving average.
• BB StdDev: The standard deviation multiplier used if Bollinger Bands are selected.

Pivot Settings

• Upper Pivot Limit: The minimum RSI value required for a high pivot to be included in the dynamic overbought calculation.
• Lower Pivot Limit: The maximum RSI value allowed for a low pivot to be included in the dynamic oversold calculation.
• Array Size: The number of recent pivots used to calculate the average for the dynamic bands.
• Pivot Strength: The number of bars required on each side of a point to confirm it as a pivot.

FAQ

How do I interpret the dynamic bands compared to the static 70/30 levels?

If the dynamic overbought band is significantly higher than 70, it suggests a strong bullish regime where typical overbought readings might be ignored. If it falls below 70, the market may be losing momentum.

What do the crosses on the RSI line mean?

The crosses represent the specific points where the script identified a pivot high or low that met the "Limit" criteria. These points are the data entries used to update the dynamic average lines.

How can I access RSI Modified?

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