Better RSI

The Better RSI indicator is a comprehensive momentum tool that enhances the standard Relative Strength Index with divergence detection, Bollinger Band integration, and cyclical analysis features. It provides traders with a more nuanced view of market momentum by combining traditional RSI mechanics with modern volatility and trend-following overlays.

Usage

The indicator can be used to identify trend exhaustion, potential reversals, and momentum breakouts. Traders can utilize the following core features:

• Divergence Analysis: The script automatically detects regular and hidden divergences. Regular bullish divergence (lower lows in price, higher lows in RSI) suggests a potential reversal, while hidden divergence can signal trend continuation.
• Bollinger Band Breakouts: By applying Bollinger Bands directly to the RSI line, the tool identifies periods of extreme momentum. Breakouts above or below these bands are highlighted, with specific visual cues for "extreme" breakouts occurring in overbought or oversold territory.
• Momentum Clouds: Dual Moving Averages (MA) applied to the RSI create a cloud that visually represents the short-term momentum trend. A green cloud indicates bullish momentum (MA1 > MA2), while a red cloud indicates bearish momentum.
• Cyclical RSI (cRSI): This mode transforms the RSI into a cyclic-adjusted oscillator, providing dynamic high and low bands based on a defined dominant cycle length, useful for timing entries within range-bound markets.

Details

The script implements several advanced technical concepts:

• Advanced Smoothing: Users can choose from multiple MA types (SMA, EMA, RMA, WMA, VWMA) for both the RSI signal line and the momentum clouds.
• Dynamic Range Scaling: In cRSI mode, the indicator uses a lookback memory to calculate percentile-based bands (Upper/Lower), allowing the oscillator to adapt to the historical volatility of the specific asset.
• Visual Optimization: The tool includes customizable candle coloring (Normal or Heikin Ashi) based on RSI conditions and an on-screen table for quick reference of current RSI values.

Settings

RSI Settings

• RSI Length: The lookback period for the RSI calculation.
• Show Regular/Hidden Divergence: Toggles the detection and display of divergence labels.
• Enable Additional Levels: Adds user-defined horizontal levels (defaults 40/60) to the oscillator pane.

MA Settings

• MA Type/Length: Determines the smoothing method and period for the RSI signal line.
• BB StdDev: Sets the standard deviation multiplier for the RSI-based Bollinger Bands.

Bollinger Band Settings

• Show Bollinger Bands: Toggles the visibility of the bands on the RSI.
• Highlight Breakouts: Enables background coloring when the RSI crosses the bands.
• Highlight BB Breakout w/ RSI OB/OS: Special highlighting for breakouts occurring past the 70/30 levels.

CRSI Settings

• Enable cRSI: Switches the core calculation to a Cyclic RSI.
• Dominant Cycle Length: Sets the period used for cyclical analysis and band calculation.

FAQ

How do I interpret the gold background highlights?

The gold background highlights represent an "Extreme Breakout," which occurs when the RSI line breaks out of its Bollinger Band while simultaneously being in an overbought (above 70) or oversold (below 30) state.

What is the difference between regular and hidden divergence?

Regular divergence is typically used to spot potential trend reversals, whereas hidden divergence is often used to identify trend continuation opportunities during pullbacks.

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.