Relative Strength & sma delta

The Relative Strength & sma delta indicator provides a multi-layered analysis of momentum by calculating the differences between two Relative Strength Index (RSI) periods and their respective moving average signals. It aims to offer traders both a detailed "close-up" view and a broader "bird's eye" perspective on trend strength and reversals through four distinct delta plots.

Usage

The indicator can be used to identify momentum shifts and trend direction based on the interaction of its various plots.

• RSI - Signal (Delta 1): Displayed as a shaded area, this shows the momentum of the primary RSI relative to its SMA. Crosses above or below the zero line indicate shifts in short-term momentum.
• RSI 2 - Signal (Delta 2): A secondary line representing the momentum of the shorter-period RSI.
• Delta 1 - Delta 2: A smoothed line representing the difference between the two momentum deltas, useful for spotting convergences or divergences between different timeframes.
• RSI 1 - RSI 2: A linear regression shaded area that shows the spread between the two RSI values. When the fast RSI is above the slow RSI, it suggests increasing bullish pressure.

Traders typically look for all components to align above the zero line for bullish confirmations or below the zero line for bearish signals.

Details

The script executes by calculating two standard RSI values (typically a longer-period and a shorter-period). It then derives signals by subtracting a Simple Moving Average (SMA) from each RSI.

Key implementation details:

• Momentum Spreads: By subtracting the signals from the RSI values, the tool removes the absolute scale of the RSI and focuses on the rate of change.
• Comparative Analysis: The "dif" plot uses a linear regression on the difference between the two RSI values to filter out minor noise, providing a clearer indication of which period is dominating the current trend.
• Zero-Line Reference: The zero line serves as the equilibrium point, where positive values represent bullish dominance and negative values represent bearish dominance.

Settings

• Length RSI 1: Sets the lookback period for the first (typically longer) RSI.
• Signal RSI Length: Sets the period for the Simple Moving Average used to calculate the signals for both RSI inputs.
• Length RSI 2: Sets the lookback period for the second (typically shorter) RSI.

FAQ

How do I interpret the shaded areas?

The shaded areas represent the difference between the two RSI lengths (RSI 1 - RSI 2) and the difference between RSI 1 and its signal. When these areas are green and above the zero line, it indicates positive momentum.

Can this be used for trend reversals?

Yes, crossovers of the various delta lines across the zero line often precede or coincide with price trend reversals.

How do I get access to Relative Strength & sma delta?

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