Stoch RSI %K Reversal Signals

The Stoch RSI %K Reversal Signals indicator tool identifies potential trend reversals by detecting local peaks and valleys in the Stochastic RSI's %K line at overbought and oversold levels.

Usage

The indicator can be used to spot short-term exhaustion points in both ranging and trending markets. When the %K line reaches extreme values and forms a structural peak or valley, the script plots a signal triangle on the oscillator.

• Buy Signals (Green Triangle): These appear when the %K line forms a local valley below the user-defined "K Buy Max Threshold" (default 30), suggesting the asset is oversold.
• Sell Signals (Red Triangle): These appear when the %K line forms a local peak above the user-defined "K Sell Min Threshold" (default 70), suggesting the asset is overbought.

Traders can utilize the directional slope filter to ensure the signal is only confirmed once the %K line has begun to change direction, reducing the likelihood of catching a "falling knife."

Details

This script calculates the Stochastic RSI based on a specified RSI and Stochastic length. The resulting %K line is smoothed using a simple moving average to filter out market noise.

The core logic relies on structural "Peak/Valley Lookback." For a signal to be valid, the current value must be the highest (for peaks) or lowest (for valleys) within a specific window of bars. This structural requirement ensures that the signal represents a meaningful turning point rather than just a high/low value. Because this lookback is required to confirm a structural turn, signals are plotted with an offset matching the lookback window.

Settings

Stochastic RSI

• RSI Length: Sets the period for the underlying RSI calculation.
• Stochastic Length: Sets the period for the Stochastic calculation applied to the RSI.
• Smooth K: Determines the smoothing factor applied to the %K line.

Signal Logic

• Peak/Valley Lookback: The number of bars used to confirm a local structural high or low.
• K Buy Max Threshold (Oversold): The maximum value the %K line can be at to trigger a buy signal.
• K Sell Min Threshold (Overbought): The minimum value the %K line can be at to trigger a sell signal.
• Use K Sell Threshold?: Toggles whether the overbought threshold is required for sell signals.
• Require Directional Slope Filter?: When enabled, signals only trigger if the %K line has started moving in the expected reversal direction.

Display

• Show Debug Markers: Displays small "X" marks where peaks or valleys were detected but filtered out by the threshold or slope settings.

FAQ

How do I use the signals?

Signals are best used in conjunction with price action or trend-following indicators. A buy signal in a bullish trend or a sell signal in a bearish trend often provides higher probability entries.

Why are signals delayed by a few bars?

The signals use a "Peak/Valley Lookback" to confirm a top or bottom. This requires a few bars of data after the pivot point to verify that it is indeed a local extreme.

How can I access Stoch RSI %K Reversal Signals?

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