Double RSI + BB

The Double RSI + BB indicator provides a volatility-adjusted momentum analysis tool that combines two Relative Strength Index (RSI) oscillators with adaptive Bollinger Bands to filter market noise and identify high-probability reversal points. By applying Bollinger Bands directly to the slow RSI calculation, the tool creates a dynamic range that helps traders identify overextended conditions even when traditional fixed RSI levels have not been reached.

Usage

The tool is primarily used to identify market reversals through the interaction between the "Fast RSI" and the Bollinger Bands applied to the "Slow RSI."

• Volatility-Adjusted Signals: Instead of relying solely on static 70/30 or 80/20 levels, users can watch for the Fast RSI to cross outside and then back into the Bollinger Band channel. This often signals a return to the mean during volatile periods.
• Trend Filtering: The Slow RSI (default 100) acts as a trend filter, while the Fast RSI (default 25) tracks immediate momentum. When both are aligned or showing specific interactions with the bands, the signal strength is considered higher.
• Divergences: The script automatically plots regular divergences between the Fast RSI and price action. A bearish divergence (price high-high, RSI lower-high) is indicated by red lines and labels, while a bullish divergence (price low-low, RSI higher-low) is indicated by green lines and labels.
• Smoothing: The indicator utilizes a smoothing parameter to filter out granular market noise, allowing for the use of longer RSI periods without excessive lag.

Details

The indicator construction involves calculating a Fast RSI and a Slow RSI, both of which are smoothed using a Simple Moving Average (SMA). The Bollinger Bands are then derived from the Slow RSI rather than price, creating an oscillator-specific volatility envelope. A unique "Bollinger Spacer" is added to the calculation, which introduces a linear gap between the upper and lower bands to thicken the channel even when using lower multipliers, providing a clearer visual representation of the neutral zone.

Settings

General Settings

• Source: The price data used for the RSI calculations (typically Close).
• Fast RSI: The lookback period for the faster momentum oscillator.
• Slow RSI: The lookback period for the slower trend oscillator.
• RSI Smoothing: The period for the SMA applied to both RSI lines to reduce noise.
• RSI OS OB: Adjusts the threshold for overbought/oversold levels relative to the 50 center line.
• Bollinger Spacer: Adds a fixed thickness to the Bollinger Band channel.
• Bollinger Length: The period used to calculate the volatility bands on the Slow RSI.
• Bollinger Multiplier: The standard deviation multiplier for the band width.

Divergence Settings

• Show Fast RSI Divergences: Toggles the visibility of divergence lines and labels.
• Divergence Sensitivity: Determines the lookback for pivot detection; higher values detect signals faster but may include more noise.
• Max Peaks to Compare: Limits how many historical peaks/valleys are checked to identify a divergence.

FAQ

How do I access the Double RSI + BB?

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

What is the advantage of using two RSIs?

Using two RSIs allows you to view short-term momentum (Fast) in the context of the long-term trend (Slow), which helps in avoiding "fakeout" signals that occur against the primary trend.

Why are the Bollinger Bands on the RSI instead of price?

Placing bands on the RSI allows the indicator to adapt to the oscillator's own volatility. This helps identify overbought or oversold conditions based on current momentum strength rather than just historical price levels.