Simple RSI-MA Algo Beats DOW By Huge Margin Over Past 100 Years!

The RSI-MA Algo indicator provides a trend-following approach by utilizing Moving Averages of the Relative Strength Index (RSI) to generate long and short signals.

Usage

The RSI-MA Algo is primarily used on higher timeframes, such as the weekly chart, to identify broad market shifts. It generates signals based on the relationship between an RSI-based Moving Average and the 50 centerline:

• Long/Cover Signal: Occurs when the specified Moving Average of the RSI crosses above the 50 level.
• Short/Sell Signal: Occurs when the specified Moving Average of the RSI crosses below the 50 level.

The strategy aims to keep traders on the right side of the primary trend, historically demonstrating an ability to avoid significant market drawdowns such as major depressions or financial crises by exiting positions when momentum shifts bearishly below the median RSI level.

Details

This tool shifts the focus from price-based moving averages to momentum-based moving averages. By smoothing the RSI with a Simple Moving Average (SMA), the indicator filters out minor fluctuations and "noise" within the RSI itself, providing a clearer indication of whether the medium-to-long-term momentum is bullish or bearish. The logic is rooted in the concept that an RSI sustained above 50 represents a dominant bullish regime, while an RSI below 50 represents a bearish regime.

Settings

• RSI Length: The lookback period used to calculate the Relative Strength Index.
• SMA Length: The period used for the Simple Moving Average that smooths the RSI values.
• Oversold: The traditional threshold for oversold conditions (visual reference).
• Overbought: The traditional threshold for overbought conditions (visual reference).

FAQ

How do I use the RSI-MA Algo?

The tool is best used on weekly timeframes for long-term trend identification. Look for crossovers of the smoothed RSI line above or below the 50 level to determine entry and exit points.

Can this be used for day trading?

While designed for long-term trend following on indices like the Dow Jones, the parameters can be adjusted for shorter timeframes, though increased market noise may affect the reliability of the signals.

How can I access the RSI-MA Algo?

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