Double RSI/LSMA

The Double RSI/LSMA indicator tool identifies potential momentum shifts by combining two Relative Strength Index (RSI) components with a Least Squares Moving Average (LSMA) trend filter. It aims to provide high-probability buy and sell signals for both swing trading and scalping across various asset classes.

Usage

The Double RSI/LSMA generates signals based on the interaction between a Fast RSI and a Slow RSI, validated by the LSMA.

• Long Signals: Occur when the Slow RSI has previously dipped below the oversold level and the Fast RSI subsequently crosses above the overbought level. If the LSMA filter is enabled, the LSMA must also be in an uptrend for the signal to appear.
• Short Signals: Occur when the Slow RSI has previously risen above the overbought level and the Fast RSI subsequently crosses below the oversold level. If the LSMA filter is enabled, the LSMA must be in a downtrend for the signal to appear.

This indicator is versatile, serving traders on lower timeframes for scalping futures or on higher timeframes for swing trading stocks and ETFs. Users should look for price action to be positioned relative to the LSMA to further confirm the trend direction.

Details

The script uses a dual-threshold approach to RSI logic. Rather than simple crossovers, it requires a "priming" phase where the Slow RSI enters an extreme zone before the Fast RSI triggers the entry. This method helps in filtering out premature signals in sideways markets. The Least Squares Moving Average (LSMA) is utilized as a trend filter by calculating the linear regression of price over a specified period, providing a smoother trendline than a standard simple moving average.

Settings

• Length Of Fast RSI: Determines the period for the faster, more reactive RSI.
• Length Of Slow RSI: Determines the period for the slower, trend-defining RSI.
• Source of RSI: The price data used for RSI calculations (default is Close).
• Overbought: The upper threshold used for signal logic (default is 68).
• Oversold: The lower threshold used for signal logic (default is 42).
• Enable LSMA: Toggles the Least Squares Moving Average trend filter on or off.
• Length Of LSMA: The lookback period for the LSMA calculation.
• Offset Of LSMA: Shifts the LSMA plot forward or backward in time.
• Source Of LSMA: The price data used for LSMA calculations.

FAQ

How do I interpret the buy and sell labels? Buy and sell labels appear when the RSI momentum conditions are met. If the LSMA filter is active, these labels only appear when the RSI momentum aligns with the LSMA trend direction.

Can I use this for different trading styles? Yes, the indicator is designed to be effective for scalping on lower timeframes and swing trading on higher timeframes by adjusting the RSI and LSMA lengths to suit market volatility.

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