RSI candles

The RSI candles indicator visualizes Relative Strength Index (RSI) values in a candlestick format to help traders identify the underlying trend momentum and potential reversal zones more clearly than a standard line oscillator.

Usage

The indicator can be used to identify trend direction and exhaustion points. When the RSI candles are trading near or above the OverBought level (default 65), the market is showing strong bullish momentum but may be reaching an extreme. Conversely, candles near the OverSold level (default 35) indicate bearish intensity or potential bottoming.

Additionally, the tool features "Bullish/Bearish Zones" displayed as background colors. These zones are determined by the crossover of two Double Exponential Moving Averages (DEMA) applied to the RSI:

• Bullish Zone: Occurs when the Fast EMA crosses above the Slow EMA, suggesting an upward trend shift.
• Bearish Zone: Occurs when the Fast EMA crosses below the Slow EMA, suggesting a downward trend shift.

Details

Unlike standard RSI indicators that only plot the closing price's RSI value, this script calculates RSI for the Open, High, Low, and Close (OHLC) values. This creates a "price action" view of the oscillator itself.

The background zones utilize a smoothed RSI calculation based on Heikin-Ashi closing prices and a timeframe-adaptive length. This smoothing process combined with DEMA crossovers helps filter out noise and provides a clearer picture of the prevailing market regime.

Settings

Main Settings

• OverBought: Sets the upper threshold level (default 65).
• OverSold: Sets the lower threshold level (default 35).
• RSI Length: The lookback period for the RSI candlestick calculations.

Zone Settings

• Timeframe Multiplier: Influences the calculation length for the background zone logic, adapting to different chart intervals.
• Fast Length: The period for the fast DEMA smoothing used for zone transitions.
• Slow Length: The period for the slow DEMA smoothing used for zone transitions.
• Show Bullish/Bearish Zones: Toggles the background coloring on or off.

FAQ

How do I interpret the RSI candles?

The RSI candles represent the strength of the relative price movement. Green candles indicate the RSI close is higher than its open, while red candles indicate the RSI close is lower than its open.

What do the background colors mean?

Green background zones indicate a bullish regime based on the DEMA crossover of the RSI, while red background zones indicate a bearish regime.

How can I access the RSI candles?

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