RSI of VWAP

The RSI of VWAP indicator is a strategy-oriented tool designed to identify momentum shifts by applying the Relative Strength Index (RSI) calculation to Volume Weighted Average Price (VWAP) data instead of standard price. This approach aims to filter market noise and capture trend-following entries confirmed by both volume and trend-line filters.

Usage

The RSI of VWAP strategy functions by monitoring momentum levels relative to volume-weighted benchmarks.

• Long Entry: A long position is triggered when the RSI of VWAP crosses above the user-defined RSI Buy Line (defaulted to 70), provided the current price is trading above the 200-period Exponential Moving Average (EMA). This ensure entries align with the primary trend.
• Partial Exits: If enabled, the strategy can take partial profits when the RSI of VWAP reaches extreme momentum levels (e.g., 90), allowing for profit securing while leaving a portion of the trade open for further trend expansion.
• Full Exit: The strategy closes the entire position when the RSI of VWAP crosses back below a specific threshold (defaulted to 30), signaling a significant loss in upward momentum.
• Risk Management: Positions are automatically sized based on a percentage of equity and a fixed stop-loss percentage, ensuring consistent risk exposure across trades.

Details

This strategy modifies the traditional RSI calculation by substituting the typical price source with VWAP. Because VWAP incorporates volume data, the resulting RSI values reflect momentum that is volume-confirmed, potentially offering more reliable signals than price-only RSI in trending markets. The addition of the 200 EMA serves as a trend filter to prevent taking long signals during established bearish regimes.

Settings

Strategy Parameters

• RSI Length: Determines the lookback period for the RSI calculation applied to the VWAP.
• RSI Buy Line: The momentum threshold used to trigger a long entry.
• RSI Exit Line: The level at which the strategy will close the entire position.
• Risk % of capital: The percentage of total equity to risk per trade.
• Stop Loss: A fixed percentage below the entry price used to calculate position size and exit losing trades.
• Allow Partial exit / take profits: A toggle to enable or disable the closing of partial positions at extreme momentum levels.

FAQ

How do I use the RSI of VWAP?

You can apply this strategy to your chart to see historical backtest results and real-time signals. It identifies high-momentum entries where volume and trend direction converge.

Does this script plot the RSI on the main chart?

No, the script plots the 200 EMA and the VWAP on the price chart, along with entry/exit labels and a visual representation of the stop-loss level. To see the RSI values themselves, you would need to add a standard RSI indicator and change its source to VWAP.

How can I access this tool?

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