Moving Average Adaptive RSI

The Moving Average Adaptive RSI indicator provides a zero-centered momentum oscillator that utilizes adaptive price impulses and customizable moving averages to identify market regimes and divergences. This tool transforms the traditional RSI calculation into a symmetric scale ranging from -100 to +100, allowing traders to clearly distinguish between bullish and bearish momentum bias via a zero-line midline.

Usage

The Usage section describes how the script can be used to interpret market momentum and trend exhaustion. The oscillator is primarily used to identify the current momentum regime based on its position relative to the zero line:

• Regime Filtering: A value above 0 indicates a positive momentum bias, while a value below 0 indicates a negative bias. Traders often use this as a filter, seeking long entries when the histogram is green (above 0) and short entries when it is red (below 0).
• Extreme Conditions: Values exceeding +80 or falling below -80 indicate overextended conditions where the risk of mean reversion increases.
• Divergence Analysis: The script automatically detects four types of divergences (Regular Bullish/Bearish and Hidden Bullish/Bearish). Regular divergences suggest potential reversals, while hidden divergences typically signal trend continuation.
• Visual Aids: The indicator includes optional candle coloring to match the momentum bias and a gradient histogram to visualize the strength of the current move.

Details

The script constructs its output through a multi-step process designed to emphasize significant price movements over minor noise:

1. Impulse Extraction: Instead of using single-bar changes, the script scans a "Sensitivity" window to find the maximum upward and downward price changes relative to the current price.
2. MA-Based Averaging: The extracted impulses are smoothed using a user-selected Moving Average (SMA, EMA, DEMA, WMA, HMA, SMMA, TEMA, or LINREG). This forms the core Relative Strength (RS) components.
3. Symmetric Scaling: The result is mapped to a symmetric scale: $100 - 200 / (1 + RS)$. This centers the traditional RSI around zero.
4. Optional Smoothing: An additional smoothing pass can be toggled to reduce volatility in the final output, though this may introduce slight lag in zero-line transitions.

Settings

Calculation

• Price Source: Determines the input series (e.g., Close, HL2) used for calculation.
• Calculation Type: Selects the moving average method used for the internal RSI impulses.
• Calculation Period: The lookback window for the primary averaging of up and down components.
• Sensitivity: Sets the window size for scanning maximum price impulses; higher values make the script more responsive to bursts.

Smoothing

• Smoothing Type: The MA type used for the optional second smoothing pass.
• Smoothing Length: The period for the secondary smoothing.
• Use Extra Smoothing?: Toggles whether the second smoothing pass is applied to the oscillator.

UI Settings

• Show Oscillator?: Toggles the visibility of the histogram.
• Paint Candles according to Trend?: Changes candle colors based on whether the oscillator is above or below zero.
• Show Static High and Low Levels: Displays the extreme overbought (+80/+100) and oversold (-80/-100) zones.

Divergences

• Show Detected Divergences?: Toggles the display of divergence lines and labels.
• Pivot Lookback Right/Left: Sets the number of bars required to confirm a pivot point for divergence detection.
• Div Signal Length: Determines the lookback range for matching price pivots with oscillator pivots.

FAQ

How do I interpret the divergence labels? The labels "R" and "H" represent Regular and Hidden divergences, respectively. Green labels indicate bullish signals, while red labels indicate bearish signals.

What is the benefit of the zero-centered scale compared to the standard 0-100 RSI? The zero-centered scale provides a clearer "bias" line. It simplifies regime detection by making the crossover of the 0-level a definitive signal for a shift in momentum.

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.