RSI Signals

The RSI Signals indicator is a specialized momentum tool designed to filter Relative Strength Index (RSI) extremes using classic price action patterns to provide high-probability trade signals. By combining traditional overbought and oversold thresholds with candlestick formations, it helps traders identify precise entry and exit points within various market conditions.

Usage

The script generates visual signals on the chart when specific price action patterns coincide with RSI extreme levels. Traders can enable or disable these patterns independently or use them in combination:

• Engulfing Patterns: Generates a "Buy" signal when a Bullish Engulfing candle occurs at the RSI Oversold level, and an "Exit" signal when a Bearish Engulfing candle occurs at the RSI Overbought level.
• Hammer and Shooting Star: Identifies reversal potential when a Hammer forms at Oversold levels (labeled "HMR") or a Shooting Star forms at Overbought levels (labeled "SS").
• Two Bar Confirmation: Triggers a signal when two consecutive bullish bars appear while the RSI is Oversold (labeled "2Bull") or two consecutive bearish bars appear while the RSI is Overbought (labeled "2Bear").

Details

The indicator calculates a standard RSI (defaulted to 7 periods) and monitors for specific price action criteria once the RSI crosses the designated Overbought (70) or Oversold (30) thresholds.

• Engulfing Logic: Looks for a candle that completely "engulfs" the previous candle's body in the opposite direction.
• Hammer/Shooting Star Logic: Uses a "Hammer Body Size" filter to determine the ratio of the candle body relative to its wick, ensuring the candlestick meets the structural requirements of a reversal pin bar.
• Sequential Bars: Requires two bars of the same color to close in the direction of the expected reversal while momentum is overextended.

Settings

• RSI Length: Determines the period used for the RSI calculation (Default is 7).
• RSI Overbought: The upper threshold where the indicator starts looking for bearish reversal patterns (Default is 70).
• RSI Oversold: The lower threshold where the indicator starts looking for bullish reversal patterns (Default is 30).
• Hammer Body Size: A multiplier (default 0.333) used to define the maximum body size relative to the wick for Hammer and Shooting Star detection.
• Bullish Bearish Engulfing: Toggle to enable or disable signals based on engulfing patterns.
• Hammer Shooting Bar: Toggle to enable or disable signals based on Hammer and Shooting Star formations.
• Two Bull Bear Bar: Toggle to enable or disable signals based on two consecutive bars in the same direction.

FAQ

How do I interpret the different labels on the chart?

The "Buy" and "Exit" labels correspond to Engulfing patterns, "HMR" and "SS" refer to Hammer and Shooting Star patterns, and "2Bull" or "2Bear" indicate the two-bar confirmation signals.

Can I use all patterns at the same time?

Yes, you can enable all three pattern toggles in the settings to see every available signal generated by the script simultaneously.

How can I access RSI Signals?

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