Volume-Weighted RSI & Multi-Normalized MACD

The Volume-Weighted RSI & Multi-Normalized MACD indicator is a comprehensive momentum and trend analysis tool that integrates volume data into a relative strength framework while offering six normalization methods for MACD. This script provides traders with enhanced sensitivity to market activity and flexible visualization through multi-timeframe support and optional stepped plotting.

Usage

The Usage section highlights how to interpret and apply the indicator's dual-component system:

• Volume-Weighted RSI (VW-RSI): Use the VW-RSI to identify overbought (+20) and oversold (-20) conditions. Because it incorporates volume, it offers a more reactive view of price strength compared to a standard RSI.
• Multi-Normalized MACD: Choose between various normalization techniques to align momentum readings with your trading style. Bounded methods (like Hyperbolic Tangent or Min-Max) are scaled to match the RSI range for easier cross-indicator comparison.
• Stepped Plotting Mode: Enable this to view discrete value changes. This reduces visual noise by only updating the plot when the price movement exceeds a user-defined threshold.
• Multi-Timeframe Analysis: Use the timeframe input to overlay higher-timeframe momentum signals onto your current chart, aiding in trend confirmation.

Details

The script utilizes a Volume-Weighted Moving Average (VWMA) approach for the RSI calculation, ensuring that price movements on high volume carry more weight. For the MACD, the tool implements several mathematical normalization functions:

• Volatility Normalization: Adjusts values based on the Average True Range (ATR).
• Non-Linear Normalizations: Uses Hyperbolic Tangent (Tanh) and Arctangent (Arctan) to cap values within a specific range, preventing extreme outliers from distorting the scale.
• Volume-Weighted EMA: The internal MACD calculations use volume-weighted exponential moving averages to prioritize active trading periods.

Settings

General

• Section Width: Determines the step size for the stepped plotting mode.
• Zero Range: Defines the threshold around the midline where values are treated as zero.
• Timeframe: Sets the data source timeframe for MTF analysis.
• Enable Stepped?: Toggles between continuous and discrete plotting.

RSI

• RSI Price Source: The price point used for calculations (default: OHLC4).
• RSI Length: The lookback period for the RSI.
• RSI MA Type: Select smoothing options including SMA, EMA, or Bollinger Bands.
• RSI Diff Threshold: Sensitivity for the stepped mode specifically for the RSI.

MACD

• Fast/Slow/Signal Length: Standard periods for MACD line and signal calculations.
• Normalization Type: Toggles for various methods like Min-Max, Volatility, Tanh, or Arctan.
• Lookback Lengths: Configures the historical window for normalization calculations.

Display

• Show MACD & Signal Line: Toggles the visibility of the primary oscillator lines.
• MACD Color Change: Changes line color based on signal line crossovers.
• Histogram 4 Colors: Enables dynamic histogram coloring based on momentum direction and strength.

FAQ

How do I interpret the VW-RSI levels? The VW-RSI is normalized between -50 and +50. Typically, levels above +20 indicate overbought conditions, while levels below -20 indicate oversold conditions.

What is the benefit of using Hyperbolic Tangent (Tanh) normalization? Tanh normalization is a non-linear scaling method that keeps the MACD bounded within your defined range, preventing the indicator from disappearing off-scale during periods of extreme volatility.

How do I access Volume-Weighted RSI & Multi-Normalized MACD? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.