RSIVolume_2graf.01 Tactics and strategy

The RSIVolume_2graf.01 indicator tool provides a dual-perspective analysis of market momentum by combining a standard Relative Strength Index (RSI) with a volume-weighted RSI to distinguish between tactical price movements and strategic volume trends.

Usage

The indicator is used to identify shifts in market sentiment by comparing price-based momentum with volume-based momentum. Traders can use it to find potential reversals or trend continuations:

• Strategic Perspective: The Volume RSI (blue circles) represents the "strategic" movement. When the Volume RSI reaches its critical lower level (defined by the level_volume*close setting, default at 8), it often serves as a signal for a potential significant price drop or exhaustion in buying pressure.
• Tactical Perspective: The Normal RSI (red line) represents the "tactical" movement. Traders should monitor the Normal RSI for short-term entries and exits once the Volume RSI has identified a strategic extreme.
• Neutral Zone: The middle region between the upper and lower limits helps identify periods of consolidation or average price oscillation.

Details

The script executes two distinct RSI calculations:

1. Standard RSI: Calculated using the standard closing price over a user-defined period (default 9).
2. Volume-Weighted RSI: This calculation uses a "volume price," derived by calculating the exponential moving average of price multiplied by volume, then dividing it by the exponential moving average of volume. This creates an RSI that is more sensitive to where the bulk of the trading volume is occurring rather than just the price action alone.

Settings

• level_close: Sets the width of the upper boundary for the normal RSI (default 70). The lower boundary is automatically calculated as 100 minus this value.
• level_volume*close: Defines the critical threshold for the Volume RSI, used to identify strategic extremes.
• rsi(close*volume,len1): The calculation period for the Volume-Weighted RSI (default 24).
• rsi(close,len3): The calculation period for the standard price-based RSI (default 9).

FAQ

How do I interpret the blue circles versus the red line?

The blue circles represent the Volume RSI (strategic trend), while the red line represents the standard Price RSI (tactical trend). Divergences or extremes in the blue circles often precede larger market shifts.

What does the yellow highlighted zone represent?

The yellow zone is defined by the critical Volume RSI level. When the Volume RSI enters this area, it indicates that the volume-weighted momentum has reached a point that may trigger a strong price reaction.

How can I access RSIVolume_2graf.01?

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