Improved RSI w/Hann

The Improved RSI w/Hann indicator provides a highly smoothed version of the classic Relative Strength Index by applying a Hann windowed finite impulse response filter. This tool aims to reduce lag and noise inherent in traditional momentum oscillators, offering a clearer interpretation of market trends and reversals.

Usage

The Usage section highlights how traders can interpret the oscillator's movements to identify market momentum.

• Zero Line Crossings: The indicator oscillates between -1.0 and +1.0. A crossing above the 0.0 centerline indicates bullish momentum, while a crossing below the 0.0 centerline indicates bearish momentum.
• Overvalued/Undervalued Regions: Values significantly above the zero line typically represent overvalued conditions, while values significantly below zero represent undervalued conditions.
• Trend Confirmation: The exceptional smoothness of the Hann windowed filter allows the indicator to stay above or below the zero line during sustained trends, minimizing the whipsaws common in standard RSI calculations.

Details

This indicator is based on John Ehlers' enhancement of J. Welles Wilder's original RSI formulation. While it maintains the core logic of calculating "closes up" and "closes down," it replaces Wilder's infinite impulse response (IIR) averaging filter with a Hann windowed finite impulse response (FIR) filter.

The Hann windowing technique applies a cosine-based weighting to the price changes over the specified length. This process yields a waveform that is confined within a normalized range of +/-1.0, rather than the 0-100 range used in the standard RSI. This transformation centers the oscillator at 0.0, making it easier to identify directional bias and momentum shifts.

Settings

• Length: Determines the lookback period for calculating price changes and applying the Hann window filter. Higher values increase smoothing but may introduce more lag.

FAQ

How do I use the Improved RSI w/Hann?

You can use it to identify trend direction via the zero line and to find potential exhaustion points in the market when the oscillator reaches extreme values near +1.0 or -1.0.

How does this differ from the standard RSI?

Unlike the standard RSI which uses a simple moving average (Wilder's) and ranges from 0 to 100, this version uses a FIR Hann window filter and is normalized between -1.0 and 1.0.

How can I access this script?

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