RSI With Noise Elimination Technology (John Ehlers)

The RSI With Noise Elimination Technology indicator provides a refined momentum oscillator by applying a Kendall rank correlation to a normalized momentum value to reduce market noise and highlight significant trends. This tool combines a scale-invariant version of the RSI with correlation analysis to offer a more stable alternative to traditional momentum oscillators.

Usage

The Usage section focuses on the relationship between the normalized momentum oscillator (RSI) and the Noise Elimination Technology (NET) line.

• Zero-Line Crossovers: When the NET line (blue) crosses above zero, it indicates a positive trend shift with noise reduction. Conversely, a cross below zero indicates a negative trend shift.
• Trend Strength: The NET line remains closer to its extremes (-1 and 1) compared to the raw normalized RSI, making it easier to identify sustained momentum.
• Divergence: Discrepancies between the underlying RSI line and the NET line can signal potential exhaustion or areas where price action is becoming erratic.

Details

The script implements concepts developed by John Ehlers, specifically a normalized momentum oscillator introduced in the May 2018 issue of Stocks & Commodities. The underlying "RSI" in this script is calculated as the change in price over a period divided by the sum of absolute changes, which is mathematically equivalent to the Efficiency Ratio used in the Kaufman Adaptive Moving Average (KAMA).

The "Noise Elimination Technology" (NET) component is a rolling Kendall rank correlation coefficient applied to this normalized momentum. While the RSI component's scale naturally shrinks as its period increases (approximated by 1/√p), the NET component remains scale-invariant, consistently reaching for values near 1 and -1 regardless of the lookback period. This ensures that the signal remains legible even during high-volatility or high-period regimes.

Settings

• RSI Length: The period used to calculate the normalized momentum oscillator (Efficiency Ratio).
• NET Length: The period used for the Kendall rank correlation calculation that smooths and filters the momentum data.
• Source: The price data used for all calculations, typically set to "Close".

FAQ

How do I use the RSI With Noise Elimination Technology?

You can use it to identify trend reversals by watching for zero-line crossovers of the blue NET line, or use the relationship between the raw momentum and the filtered NET line to gauge market noise.

What makes this different from a standard RSI?

Unlike a standard RSI which uses an average of gains and losses, this version uses a normalized efficiency ratio and then applies a rank correlation coefficient to filter out "noise," resulting in a smoother line that stays near its maximum or minimum during trends.

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.