Trending RSI

The Trending RSI indicator provides a unique take on the Relative Strength Index by integrating trend information directly into the oscillator to address the limitations of traditional normalized RSI. By transforming the RSI into a centered oscillator, it allows traders to identify market phases and trend strength through a dynamic center line and traditional overbought/oversold zones adapted to an unbounded scale.

Usage

The Trending RSI can be used as both a momentum oscillator and a directional filter. Unlike the traditional 0-100 RSI, this tool uses a center line (0) to represent the trend; when the center line is above 0, the market is in an uptrend, and when below 0, it is in a downtrend.

• Directional Filtering: Traders can use the polarity of the center line to filter trades, only taking long positions when the center line is positive or short positions when it is negative.
• Overbought/Oversold: The indicator provides 70 and 30 zones as bands. Reversals are clearer when these zones are combined with the color-coded market phases of the center line.
• Momentum Analysis: An optional Binomial Moving Average (MA) can be enabled to track momentum. This filter acts similarly to a Gaussian filter to provide a smooth representation of price movement.
• Divergence Detection: The script includes configurable bullish and bearish divergence logic to identify potential trend exhaustion.

Details

The indicator works by reverse-engineering the RSI calculation to remove the 0-100 normalization, turning it into a centered oscillator. This allows the "mean" of the RSI to shift according to the trend, preventing the indicator from becoming "stuck" in overbought or oversold territory during strong trending moves.

It also utilizes a novel filtering technique called a "Phi Smoother" with a low lag-to-smoothing ratio to clean up the bands and the signal line. Additionally, the multi-timeframe (MTF) functionality allows users to overlay RSI data from higher timeframes onto their current chart.

Settings

Settings

• Source: The price data used for calculation (e.g., Close).
• Length: The lookback period for the RSI calculation.
• Top Range: The RSI value (e.g., 70) that the upper band represents.
• Bottom Range: The RSI value (e.g., 30) that the lower band represents.
• MA Length: The period for the optional Binomial Moving Average.

Smoothing

• Signal Smoothing: Adjusts the period of the smoothing filter for the RSI line.
• Signal Smoothing Speed: Adjusts the responsiveness of the signal filter.
• Boundary Smoothing: Adjusts the period of the filter applied to the bands.

Divergence

• Look Left/Right: Sets the pivot lookback and lookforward periods for divergence detection.
• Lower/Upper Range: Defines the minimum and maximum candle distance between peaks/troughs for a valid divergence.
• Enable Bullish/Bearish Divergence: Toggles the plotting of divergence labels and lines.

FAQ

How do I interpret the center line?

The center line acts as a trend bias indicator. When it is colored bullishly and stays above the zero mark, it indicates a strong positive trend. If the RSI fluctuates while the center line remains below zero, the market is in a bearish phase.

What is the Binomial MA?

The Binomial MA is a special moving average included in the script that approximates a normal curve, providing a high-quality smooth line with minimal lag, useful for identifying the underlying momentum of the RSI.

How can I access this indicator?

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