Premier RSI Oscillator

The Premier RSI Oscillator indicator provides a high-sensitivity momentum tool that applies the Premier Stochastic Oscillator formula to the Relative Strength Index (RSI) to anticipate early market turns and identify definitive trading zones.

Usage

The Premier RSI Oscillator (PRO) is used to identify shifts in market momentum and potential trend reversals earlier than standard RSI readings. It oscillates between values of 1 and -1, with a zero line acting as the primary pivot point for directional bias.

• Zero Line Crosses: A move above the zero line suggests bullish momentum, while a move below suggests bearish momentum.
• Trading Zones: The levels at 0.2 and -0.2 serve as initial thresholds for momentum strength. Levels at 0.9 and -0.9 represent extreme overbought and oversold conditions.
• Trend Confirmation: When the indicator is above 0 and rising, it confirms strong upward pressure. Conversely, when it is below 0 and falling, it confirms strong downward pressure.
• Bar Coloring: If enabled, the bar colors change based on the indicator's position and slope. Bright green/red indicates strong momentum in the direction of the trend, while darker shades indicate potential exhaustion or weakening momentum.

Details

The script is a modification of the original Premier Stochastic Oscillator (PSO) developed by Lee Leibfarth. Instead of using raw price data for the stochastic calculation, this version utilizes the RSI as the primary input.

The calculation process involves:

1. Calculating the RSI of the source price.
2. Applying a Stochastic calculation to that RSI value.
3. Normalizing the stochastic value and smoothing it using a double Exponential Moving Average (EMA).
4. Applying a sigmoid-like transformation using the exponential function to bound the values between 1 and -1, resulting in a more responsive and "snappy" oscillator compared to traditional momentum indicators.

Settings

• Source: Determines the price data used for the RSI calculation (default is Close).
• RSI Length: Sets the lookback period for the internal RSI calculation.
• Stoch length: Sets the lookback period for the stochastic calculation applied to the RSI.
• Smooth length: Adjusts the period for the double EMA smoothing applied to the normalized stochastic values.
• Enable bar colors: Toggles the chart bar coloring based on the PRO value and its directional slope.

FAQ

How do I interpret the zero line in the Premier RSI Oscillator?

The zero line represents the equilibrium point. When the oscillator crosses above zero, it indicates that bullish momentum is accelerating; a cross below zero indicates that bearish momentum is taking control.

What is the advantage of using RSI as an input for the Premier Stochastic?

Using RSI instead of raw price helps filter out minor market noise and focuses the oscillator on the underlying strength or weakness of the price movement, leading to clearer signals in trending markets.

How can I access the Premier RSI Oscillator?

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