The Perfect RSI (Ehler's Cycle RSI Modified with Discriminator)

The Perfect RSI (Ehler's Cycle RSI Modified with Discriminator) indicator utilizes high-pass filtering and a Homodyne Discriminator to dynamically calculate the dominant price cycle, providing a more adaptive and accurate Relative Strength Index.

Usage

The indicator is used similarly to a standard RSI but with improved responsiveness to current market cycles. Traders can use it to identify overbought and oversold conditions with reduced lag and fewer false signals. When the oscillator crosses above the overbought level (default 70), it may indicate a potential reversal or exhaustion; conversely, a cross below the oversold level (default 30) may indicate a potential buying opportunity.

The addition of the "Apply Double Smoothing" feature allows users to further filter out market noise, resulting in a cleaner trend line that is easier to interpret for long-term momentum shifts.

Details

The script is based on concepts developed by John Ehlers. It implements a Roofing Filter, which combines a high-pass filter to remove low-frequency noise and a SuperSmoother filter to eliminate high-frequency aliasing.

The core innovation is the Homodyne Discriminator, which measures the phase rate of change to determine the dominant cycle period of the price data. The RSI length is then automatically adjusted to half of this detected cycle length, ensuring that the indicator period is always mathematically optimized for the current market volatility and rhythm.

Settings

• Apply Double Smoothing: Enables an additional SuperSmoother filter to the price data before the RSI calculation to reduce noise.
• Overbought: Sets the upper threshold for overbought conditions (default 70).
• Oversold: Sets the lower threshold for oversold conditions (default 30).
• Roofing Band Upper: Defines the high-pass cutoff period for the roofing filter.
• Roofing Band Lower: Defines the low-pass cutoff period for the roofing filter.

FAQ

How do I access The Perfect RSI (Ehler's Cycle RSI Modified with Discriminator)?

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

What makes this different from a regular RSI?

Unlike a standard RSI that uses a fixed lookback period (e.g., 14), this version uses a Homodyne Discriminator to constantly measure the market's cycle and updates the period length in real-time.

Can I use this for trend following?

Yes, the adaptive nature of the cycle calculation helps the RSI stay in overbought or oversold territory more effectively during strong trends while providing clearer signals during mean-reversion phases.