Sto RSI and kijun-sen line to determine and follow the trend

The Sto RSI and kijun-sen line to determine and follow the trend indicator identifies potential trend entry points by combining Stochastic RSI thresholds with Kijun-sen confirmation to differentiate between trend continuations and counter-trend reversals.

Usage

The script generates signals based on the relationship between the Stochastic RSI %K line and the Kijun-sen (Base Line) from the Ichimoku Cloud system.

• Bullish Signals: A buy signal is triggered when the %K line crosses above the 25 level. If the price is already above the Kijun-sen, it is considered a trend continuation signal. If the price is below the Kijun-sen, it is marked as a counter-trend signal, suggesting a potential trend shift.
• Bearish Signals: A sell signal is triggered when the %K line crosses below the 75 level. If the price is below the Kijun-sen, it serves as a downtrend continuation signal. If the price is above the Kijun-sen, it is marked as a counter-trend signal.

Users should evaluate counter-trend signals with caution, typically waiting for price action to cross the Kijun-sen line to confirm the new directional bias.

Details

The indicator utilizes the Kijun-sen (Base Line) as a dynamic trend filter. The Kijun-sen is calculated as the average of the highest high and lowest low over a specific period (defaulting to 26). By requiring the price to be on a specific side of this line, the script filters out Stochastic RSI crosses that may occur against the prevailing momentum. The Stochastic RSI component uses a standard RSI input which is then transformed into a Stochastic oscillator to highlight overbought and oversold momentum shifts.

Settings

Ichimoku Settings

• Conversion Line Periods: The lookback period for the Tenkan-sen calculation.
• Base Line Periods: The lookback period for the Kijun-sen calculation used for signal filtering.
• Lagging Span 2 Periods: The lookback period for the Senkou Span B.
• Displacement: The forward displacement value for the Ichimoku components.

Stochastic RSI Settings

• Smooth K: The smoothing period for the %K line.
• Smooth D: The smoothing period for the %D line.
• RSI Length: The lookback period for the underlying RSI calculation.
• Stochastic Length: The lookback period used to calculate the Stochastic value from the RSI.
• RSI Source: The price source used for the RSI calculation (default is Close).

FAQ

How do I use the counter-trend signals?

Counter-trend signals (displayed with transparency) indicate momentum shifts that haven't yet flipped the Kijun-sen trend. Traders often use these as early warnings or wait for the price to cross the Base Line for confirmation.

Can this be used on lower timeframes?

Yes, while the original concept was observed on the 1-hour chart, the logic is applicable to various symbols and timeframes depending on the user's trading style.

How can I access Sto RSI and kijun-sen line to determine and follow the trend?

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