RSI of VWAP [SHORT selling]

The RSI of VWAP [SHORT selling] tool is a specialized momentum-based strategy designed to identify bearish trend reversals and short-selling opportunities using a combination of the Relative Strength Index (RSI) applied to Volume Weighted Average Price (VWAP) and trend-filtering moving averages. This script aims to provide high-probability short entries by analyzing price behavior relative to the EMA 200 and market volatility via the VIX RSI.

Usage

The script is primarily used to identify short-side entries in various market conditions. It features a distinct visual interface where the background and bars change color when a short position is active.

• Standard Short Entry: Occurs when the RSI of VWAP crosses below the oversold level (default 25) while the price remains below the 200-period EMA.
• Weekly Trend Entry: Triggered when the weekly RSI of VWAP crosses below the overbought level (70), indicating a potential top-heavy market structure relative to the session VWAP.
• Volatility-Based Entry (VIX): When the "Check VIX RSI" setting is enabled, the strategy looks for a "falling knife" scenario where the VIX RSI crosses above 60 while the RSI of VWAP is crossing down, allowing for shorts even if the price is above the EMA 200.
• Partial Take Profits: If enabled, the strategy will close 1/3 of the position when the price is below the entry price and the RSI of VWAP crosses back above the 25 level.
• Full Exit: The entire position is closed when the RSI of VWAP crosses above the overbought level (70).

Details

The strategy calculates the RSI based on VWAP rather than standard price data to better account for volume-weighted momentum. It utilizes a 200-period Exponential Moving Average (EMA) as a primary trend filter to ensure shorts are generally taken in bearish environments. For more aggressive setups, it integrates the CBOE Volatility Index (VIX) to detect market panic or sharp reversals. The inclusion of a weekly timeframe RSI of VWAP helps traders visualize higher-timeframe momentum shifts directly on their lower-timeframe charts.

Settings

Main Settings

• RSI Length: Adjusts the lookback period for the RSI calculation (default 11).
• RSI Oversold (SHORT sell Line): Sets the threshold for identifying bearish momentum breakthroughs.
• RSI Overbought (SHORT Exit/cover Line): Sets the threshold for exiting short positions.
• Risk % of capital: Determines the percentage of equity to risk per trade.
• Stop Loss: Defines the percentage-based stop loss (default 5%).
• Allow Partial exit / take profits: Enables or disables the closing of a portion of the position at initial momentum targets.

Visuals & Filters

• Show Weekly Vwap RSI: Toggles the visibility of the weekly momentum line.
• Check VIX RSI: Changes the logic to focus on volatility spikes rather than price proximity to the EMA 200.

FAQ

How do I use the RSI of VWAP [SHORT selling] indicator?

The indicator is used to find short entries when volume-weighted momentum (RSI of VWAP) breaks down. You can look for yellow background highlights which signal potential re-entries in a trending market.

What is the "Check VIX RSI" setting for?

This setting allows the strategy to take short trades during high-volatility periods even if the price is above the long-term EMA 200, essentially catching rapid reversals indicated by rising fear in the VIX.

Where can I access this script?

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