RSI 30-50-70 moving average

2. Okt.

Description:

The RSI 30-50-70 Moving Average indicator plots three distinct moving averages based on different RSI ranges (30%, 50%, and 70%). Each moving average corresponds to different market conditions and provides potential entry and exit signals. Here's how it works:

• RSI_30 Range (25%-35%): The moving average of closing prices when the RSI is between 25% and 35%, representing potential oversold conditions.

• RSI_50 Range (45%-55%): The moving average of closing prices when the RSI is between 45% and 55%, providing a balanced perspective for trend-following strategies.

• RSI_70 Range (65%-75%): The moving average of closing prices when the RSI is between 65% and 75%, representing potential overbought conditions.

This indicator offers flexibility, as users can adjust key parameters such as RSI ranges, periods, and time frames to fine-tune the signals for their trading strategies.

How it Works:

Like traditional moving averages, the RSI 30-50-70 Moving Averages can highlight dynamic levels of support and resistance. They offer additional insight by focusing on specific RSI ranges, providing early signals for trend reversals or continuation. The default settings can be used across various assets but should be optimized via backtesting.

Default Settings:

• RSI_30: 25% to 35% (Oversold Zone, yellow line)

• RSI_50: 45% to 55% (Neutral/Trend Zone, green line)

• RSI_70: 65% to 75% (Overbought Zone, red line)

• RSI Period: 14

Buy Conditions:

• Use the 5- or 15-minute time frame.

• Wait for the price to move below the RSI_30 line, indicating potential oversold conditions.

• Enter a buy order when the price closes above the RSI_30 line, signaling a recovery from the oversold zone.

• For a more conservative approach, use the RSI_50 line as the buy signal to confirm a trend reversal.

• Important: Before entering, ensure that the RSI_30 moving average has flattened or started to level off, signaling that the oversold momentum has slowed.

Sell Conditions:

• Use the 5- or 15-minute time frame.

• Wait for the price to close above the RSI_70 line, indicating potential overbought conditions.

• Enter a sell order when the price closes below the RSI_70 line, signaling a decline from the overbought zone.

• Important: Similar to buying, wait for the RSI_70 moving average to flatten or level off before selling, indicating the overbought conditions are stalling.

Key Features:

1. Dynamic Range Customization: The indicator allows users to modify the RSI ranges and periods, tailoring the moving averages to fit different market conditions or asset classes.

2. Trend-Following and Reversal Signals: The RSI 30-50-70 moving averages provide both reversal and trend-following signals, making it a versatile tool for short-term traders.

3. Visual Representation of Market Strength: By plotting moving averages based on RSI levels, traders can visually interpret the market’s strength and potential turning points.

4. Risk Management: The built-in flexibility allows traders to choose lower-risk entries by adjusting which RSI level (e.g., RSI_30 vs. RSI_50) they rely on for signals.

Practical Use:
Different assets respond uniquely to RSI-based moving averages, so it's recommended to backtest and adjust ranges for specific instruments. For example, volatile assets may require wider RSI ranges, while more stable assets could benefit from tighter ranges.

Checking for Buy conditions:

1st: Wait for current price to go below the RSI_30 (yellow line)
2nd: Wait and observe for bullish divergence
3rd: RSI_30 has flattened indicating potential gain of momentum after a bullish divergence.
4th: Enter a buy order when the price closed above the RSI_30, preferably when a green candle appeared.