ADX + Keylevel + RSI

The ADX + Keylevel + RSI indicator provides a comprehensive view of market momentum and trend strength by combining the Average Directional Movement Index (ADX) with the Relative Strength Index (RSI).

Usage

The Usage section focuses on interpreting the relationship between trend strength and price momentum. Traders can use the ADX line to determine if a market is trending or ranging relative to a user-defined key level. When the ADX is above the key level, it suggests a strong trend is present, while values below indicate a weakening trend or sideways price action.

The RSI component is used to identify potential overbought or oversold conditions. By observing both indicators simultaneously, users can look for confluences, such as a strong trend (ADX > Key Level) coinciding with RSI momentum, to better time entries and exits.

Details

The script implements two primary technical analysis concepts:

• Average Directional Index (ADX): Calculated using smoothed directional movement (DI+ and DI-), the ADX measures the strength of a trend regardless of its direction. The script includes a customizable smoothing period and a horizontal "Keylevel" to act as a threshold for trend identification.
• Relative Strength Index (RSI): A standard momentum oscillator that measures the speed and change of price movements. It operates on a scale of 0 to 100, with default levels at 70 (overbought) and 30 (oversold).

Settings

• Length: Sets the period for the RSI calculation.
• ADX Smoothing: Adjusts the lookback period used for the ADX calculation to smooth the output.
• Keylevel for ADX: Defines the threshold line (horizontal) used to distinguish between weak and strong trend environments.

FAQ

How do I interpret the ADX line? The thick red line represents the ADX. If it is rising above the white Keylevel, it indicates the current trend is gaining strength. If it is falling or below the level, the trend is considered weak.

What do the green shaded areas represent? The green shaded area represents the standard RSI range between 30 and 70. The teal line moving through this area tracks price momentum.

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