RSI from Rolling VWAP [CHE]

The RSI from Rolling VWAP [CHE] indicator integrates the Relative Strength Index (RSI) with a Rolling Volume-Weighted Average Price (VWAP) to provide momentum insights based on volume-weighted price action.

Usage

The indicator can be used to identify trend reversals and momentum shifts by observing how the RSI of the Rolling VWAP interacts with predefined thresholds. Traders typically look for:

• Overbought/Oversold Conditions: When the RSI crosses above the lower threshold, a "Bullish" label appears, signaling a potential upward reversal. Conversely, a cross below the upper threshold triggers a "Bearish" label.
• Trend Smoothing: The inclusion of various Moving Average types (SMA, EMA, WMA, etc.) allows users to smooth the RSI line to filter out market noise and better visualize the underlying trend.
• Dynamic Adaptability: By switching between "Auto Timeframe" and "Fixed Time Period," the indicator can adapt to different trading styles, from scalping to swing trading.

Details

This tool calculates a Rolling VWAP by summing the price-volume product over a specific lookback window (either automatically determined or user-defined) and dividing it by the total volume within that same window. Unlike a standard RSI which uses raw price changes, this script calculates the RSI based on the changes in the Rolling VWAP. This methodology ensures that momentum readings are weighted by volume, potentially offering a more accurate representation of market strength compared to price-only oscillators.

Settings

Source Settings

• Source: The data source used for the VWAP calculation (default is hlc3).

Time Settings

• Use Fixed Time Period: Toggle to manually define the lookback window.
• Days/Hours/Minutes: Sets the duration of the rolling window when the fixed period is enabled.
• Minimum Bars: The minimum number of data points required before calculations begin.

RSI Settings

• RSI Length: The period used for the internal RSI calculation.
• RSI Upper Threshold: The level used to identify overbought conditions (default 90).
• RSI Lower Threshold: The level used to identify oversold conditions (default 10).

MA Settings

• MA Type: Choose between SMA, Bollinger Bands, EMA, SMMA, WMA, or VWMA to smooth the RSI.
• MA Length: The lookback period for the chosen moving average.

FAQ

How do I interpret the Bullish and Bearish labels?

The labels appear when the RSI of the Rolling VWAP crosses back into the neutral zone from extreme threshold levels, suggesting a potential exhaustion of the current trend.

What is the advantage of using Rolling VWAP instead of regular price?

Rolling VWAP incorporates volume data into the price average, providing a benchmark that reflects where the majority of trading activity occurred over a specific timeframe.

How can I access this tool?

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