RSI Accumulation/Distribution [M]

The RSI Accumulation/Distribution [M] indicator identifies potential market turning points by highlighting periods where the Relative Strength Index (RSI) remains in overbought or oversold zones for extended durations.

Usage

The tool highlights "Accumulation" and "Distribution" zones using colored boxes on the RSI panel. These zones appear when the RSI exits an extreme level after having stayed there for a specific number of bars.

• Accumulation (Bullish): Occurs when the RSI spends a significant amount of time below the lower band (default 30) and then crosses back above it.
• Distribution (Bearish): Occurs when the RSI spends a significant amount of time above the upper band (default 70) and then crosses back below it.

The indicator uses three distinct levels based on the duration of the extreme condition:

• Level 1 (5+ Bars): Short-term exhaustion.
• Level 2 (7+ Bars): Moderate exhaustion.
• Level 3 (9+ Bars): Significant exhaustion, often suggesting a higher probability of a trend reversal.

Details

The script utilizes a smoothed RSI (calculated via a 3-period Simple Moving Average of the standard RSI) to filter out market noise and reduce false signals. It tracks the barssince the RSI entered the extreme zone to calculate the duration. Once the RSI returns within the bands, a box is drawn from the point of entry to the point of exit, encompassing the highest or lowest RSI value reached during that period.

Settings

Settings

• Length: Determines the lookback period for the RSI calculation (default is 14).
• Upper Band: Sets the threshold for the overbought/distribution zone (default is 70).
• Lower Band: Sets the threshold for the oversold/accumulation zone (default is 30).

Customize

• Show Level 1/2/3 Signal: Toggles the visibility of signals for the respective duration levels.
• Bull/Bear Colors: Allows users to customize the background and border colors for the accumulation and distribution boxes across all three levels.

FAQ

How do I interpret the different signal levels?

The levels represent the intensity of the trend exhaustion. A Level 3 signal indicates the price stayed in an extreme RSI zone for 9 or more bars, which typically suggests a more significant accumulation or distribution phase than a Level 1 signal.

Can I use this for trend following?

While the indicator identifies exhaustion, it is best used in conjunction with other technical analysis tools like price action patterns or trend indicators to confirm that a reversal is actually taking place before entering a trade.

How do I access RSI Accumulation/Distribution [M]?

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