Relative Strength Index (RSI)
The Relative Strength Index ( RSI ) is a momentum indicator that measures the extent of recent price changes to analyse overbought or oversold conditions. RSI values range from 0 to 100. In general, RSI divergence means that the RSI indicator is moving in the opposite direction compared to the price. So while the price is moving, the RSI is telling us in advance that we can expect a change in direction.
The RSX is the noise-free version of the more familiar RSI oscillator. Normally, any indicator can be smoothed by applying a moving average. However, a major disadvantage of such a method is that there is a time lag between the indicator and the price. The RSX indicator tries to do this without signal delay.
Money Flow Indicator (MFI)
The MFI is essentially the RSI with the added aspect of volume . Because of its close similarity to the RSI , the MFI can be used in very similar ways.
The RSI Laguerre works in the same way as the classic RSI , but is more sensitive to recent prices. When it crosses the signal line at the value of 0.15 from the bottom to the top, a buy signal is created, while overbought markets have values of 0.75 or higher
Detection of divergences
The detection of divergences in the RSI is one of the most important functions of this indicator. The reason is that an divergence is a more reliable signal than the overbought and oversold indicators themselves. You get overbought and oversold signals all the time. However, the divergence is a rare event.
In general, divergence means that the RSI indicator is moving in the opposite direction compared to the price. So while the price is moving, the RSI is telling us in advance that we can expect a change in direction.
A positive divergence is when the price trend has lower lows and lower highs, while the indicator does the opposite - higher highs and higher lows. The price continues to fall while the RSI indicator begins to rise.
Negative divergence is the opposite of positive divergence. It applies to uptrends where the price reaches higher highs and higher lows. However, the RSI shows lower highs and lower lows - the price goes up but the RSI goes down. The price closes with higher highs and higher lows, while the indicator shows the opposite - lower lows and lower highs, confirming a negative divergence. As a result, there is a sharp decline in the price.
Have fun using and trying out this flexible indicator!
- add new Option "Transform to Center" ==> Centres RSI, RSX, RSI Laguerre, MFI to the 0 axis and overlays the histogram for a better overview and optimal use of the available space.
- add new Variant "CCI" Commodity Channel Index. The CCI is a well-known and widely used indicator used to detect overbought/oversold levels, trend reversals as well as divergences.
- add new MA Type => "TEMA" (Triple EMA)
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