RSI Bands %B

The RSI Bands %B indicator provides a normalized representation of price relative to dynamic Relative Strength Index (RSI) bands, allowing traders to identify overextended market conditions and trend shifts.

Usage

The Usage section focuses on the relationship between price and the calculated RSI bands. When the %B value reaches or exceeds 1.0, it indicates that price is trading at or above the upper RSI band (typically associated with overbought conditions). Conversely, a value near or below 0 indicates price is trading at or below the lower RSI band (oversold).

The center line at 0.5 acts as a pivot point for trend momentum. Crosses above 0.5 can signal a bullish shift in the price-to-RSI relationship, while crosses below 0.5 can signal bearish momentum.

Details

This tool is based on the concept of RSI Bands, which project RSI overbought and oversold levels back onto the price chart as dynamic envelopes. The %B calculation then normalizes the current price's position within those bands using the formula: (Price - Lower Band) / (Upper Band - Lower Band).

The calculation utilizes an Exponential Moving Average (EMA) with a length of 2 * length - 1 to smooth the upward and downward price changes (auc and adc), which are then used to solve for the price levels that would result in the specified RSI overbought/oversold levels. This creates a bounded oscillator that reflects price volatility and momentum simultaneously.

Credit to LazyBear for the original conceptualization of RSI Bands.

Settings

• RSI Overbought: Sets the RSI level used to calculate the upper band (default is 70).
• RSI Oversold: Sets the RSI level used to calculate the lower band (default is 30).
• RSI Length: The lookback period used for the RSI calculation (default is 14).
• Source: The price data used for calculations (typically "close").

FAQ

How do I interpret the %B value?

A value of 1.0 means price is at the upper band, while 0 means it is at the lower band. Values above 1 or below 0 indicate extreme extensions relative to the RSI parameters.

Can I change the sensitivity of the bands?

Yes, by adjusting the RSI Length or the Overbought/Oversold levels in the settings, you can make the bands more or less reactive to price volatility.

How do I access RSI Bands %B?

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