FIB Band Signals with RSI Filter

The FIB Band Signals with RSI Filter indicator combines Fibonacci-spaced volatility bands based on a Volume Weighted Moving Average (VWMA) with an RSI filter to identify potential trend exhaustion and entry points.

Usage

The tool is primarily used to identify areas of support and resistance based on statistical deviations and Fibonacci levels.

• Buy Signals: Generated when the price interacts with the lower bands, the mean (basis), or the initial upper bands, provided the RSI is below the defined low threshold.
• Sell Signals: Generated when the price interacts with the outermost upper bands, provided the RSI is above the defined high threshold.

The indicator is designed with a long bias, offering more granular buy signals across the lower half of the bands and the mean, while focusing on extreme overextension for sell signals. Traders should adjust the RSI thresholds and band settings to suit the volatility of the specific asset and timeframe being traded.

Details

The indicator's foundation is a Bollinger Band-style construction, but instead of a standard Simple Moving Average, it uses a Volume Weighted Moving Average (VWMA) as the basis. The bands are projected using a multiplier of the standard deviation (defaulting to 3.0), which statistically encompasses approximately 99.73% of price action.

The specific band levels are derived using Fibonacci ratios: 0.236, 0.382, 0.5, 0.618, 0.764, and 1.0. These levels act as dynamic layers of support and resistance. Signals are triggered when a 1-period SMA of the source price crosses these Fibonacci levels, filtered by the Relative Strength Index (RSI) to ensure the signals align with oversold or overbought conditions.

Settings

• VWMA Length: Sets the lookback period for the Volume Weighted Moving Average basis and standard deviation.
• Multiplier: Determines the width of the outer bands (1.0 Fibonacci level) in standard deviations.
• Source: The price data used to calculate the bands (default is HLC3).
• Signal Source (SMA1): The price data used to determine crossings for signal generation.
• RSI Period Length: The lookback period for the RSI calculation.
• RSI High: The overbought threshold for filtering sell signals.
• RSI Low: The oversold threshold for filtering buy signals.

FAQ

How do I interpret the different band colors?

The upper bands are shaded in red to indicate potential resistance zones, while the lower bands are shaded in green to indicate potential support zones. The intensity of the color increases toward the outer bands.

Can I use this for shorting?

While the script includes sell signals on the upper bands, it is inherently long-biased by design, offering more buy signal triggers across various levels compared to sell signals.

How do I access FIB Band Signals with RSI Filter?

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