Cyclic Smoothed RSI with Divergence Indicator

The Cyclic Smoothed RSI with Divergence Indicator tool combines a refined oscillator with automated divergence detection to provide more responsive signals than a standard RSI. It utilizes adaptive bands based on cyclic memory and a Weighted Moving Average (WMA) to help traders identify trend exhaustion, potential reversals, and market corrections.

Usage

The indicator is designed to be used as a comprehensive oscillator for timing entries and exits. The primary signals come from the interaction between the cRSI line, its adaptive bands, and the price action.

• Adaptive Bands: Unlike static levels, these bands adapt to the market vibration. A green dot appears when the cRSI crosses back above the lower band (potential buy/long), and a red dot appears when it crosses back below the upper band (potential sell/short).
• WMA Trend Tracking: The region between the bands is colored green when the cRSI is above the WMA (rally) and red when it is below (correction). Crossings of the WMA are critical triggers for trend changes.
• Divergence Signals: The script automatically plots regular and hidden bullish/bearish divergences directly on the oscillator. These are most effective when they align with MACD crossovers or reversals from the adaptive bands.

Details

The Cyclic Smoothed RSI (cRSI) is based on the work of Lars von Thienen in "Decoding The Hidden Market Rhythm." It improves upon the classic RSI by adding smoothing adjusted for market vibration and using the dominant cycle length as an input.

Key technical enhancements include:

• Smoothing: Torque-based smoothing to reduce noise while maintaining responsiveness.
• Cyclic Memory: Adaptive upper and lower bands are calculated using a lookback period proportional to the dominant cycle, identifying relative extremes rather than fixed thresholds.
• Multi-Confirmation: By combining cRSI with automated pivot-based divergence detection, the script filters out many false triggers common in standard RSI indicators.

Settings

• cRSI Source: Determines the price source (e.g., close, hl2) for the calculation.
• cRSI Dominant Cycle Length: The core parameter for the cycle length; higher values increase smoothing and lag.
• cRSI Moving Average Length: The length of the WMA used to determine the trend coloring and trend-following signals.
• Pivot Lookback Right/Left: Sets the number of bars required to confirm a pivot high or low for divergence detection.
• Pivot Range (Max/Min): Defines the lookback window in bars to find previous peaks or troughs for comparison.
• Plotting Toggles: Options to enable or disable specific divergence types (Regular Bullish, Hidden Bullish, etc.).

FAQ

How do I use the cRSI signals effectively?

Look for green dots (crosses above the lower band) during oversold conditions and red dots (crosses below the upper band) during overbought conditions, preferably confirmed by a divergence label or a WMA crossover.

What timeframes work best for this script?

While it can be adapted to any timeframe, 4-hour (4h) and Daily (1D) charts often provide the most reliable signals for the dominant cycle calculations.

How can I access this indicator?

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