Cyclic Smoothed RSI with period highlighter
This is an advanced TradingView "Invite-Only" indicator which requires activation based on a valid subscription from whentotrade.com or WaveCycleTrader.
This indicator is not designed for use as an automated trading strategy
This is an improved technical indicator using the dominant cycle to provide its advanced features. The basic applications of technical analysis for using oscillators apply. The script is intended for use in discretionary trading.
The cyclic smoothed RSI MTF indicator is an enhancement of the Relative Strength Indicator "RSI", adding
- using the current dominant cycle length as input for the indicator to ensure more accurate change in trends,
- additional smoothing without introducing lag and maintaining clear sharp turns for signal generation,
- adaptive upper and lower bands to avoid whipsaw trades and adapt the indicator to trending/cyclic conditions,
- using higher time-frame csRSI oversold/overbought conditions to automatically highlight time windows with green/red backgrounds on the indicator panel for signal filtering and/or alert rules.
This indicator is an advanced version of the public available open-source cyclic smoothed RSI indicator. It provides fully automatic time frame highlighting by using a cyclically smoothed RSI from a higher time frame to indicate time frames with high probability signals. These high probability windows are highlighted when the indicator from the higher time frame is in dynamic overbought or oversold territory.
Overview and Examples
The following chart illustrates how it works and compares it against the basic RSI indicator. The csRSI indicator shows automatic highlighted periods with highlighted red and green time zones. These areas are based on another cyclic smoothed RSI indicator from a higher time-frame. The periods are marked red when the higher time-frame csRSI is above the upper bands and marked green when below the lower dynamic bands.
These colored periods in the indicator panel indicate the time to look for signals from the csRSI indicator. The derived signals are marked on the price chart. While the standard RSI would give too much whipsaw trades as indicated by the questions marks, however. the csRSI MTF version is able to filter the high probability signals while skipping false signals with a clear, objective procedure.
S&P500 EMini Futures
csRSI 2H chart / 1D filter example signals
Chart 1: S&P E-Mini Futures 2h chart with daily higher time-frame filtering period for the csRSI, showing the standard RSI in the lower panel for signal comparison, signals from the csRSI are marked on the price chart
Chart Link: https://www.tradingview.com/x/5HBRAtUa/
csRSI 2H chart / 1D filter example signals
Chart 2: Bitcoin BTC/USD 2h chart with daily higher time-frame filtering period for the csRSI, signals marked
Chart Link: https://www.tradingview.com/x/h407gPQm/
csRSI 20min chart / 2h filter example signals
Chart 3: Bitcoin BTC/USD 20min chart with 2H higher time-frame filtering period for the csRSI, signals marked
Chart Link: https://www.tradingview.com/x/zx66TIpJ/
All three examples are setup with the basic standard settings and no additional parameter adjustments. The placed arrows on the price/indicator panel and the projection price areas have been added manually to visualize the signals for an discretionary trading approach. They are derived based on standard technical indicator oscillator readings (signal turn above/below bands). Due to the nature of the indicator (ultra-smooth, sharp curves, dynamic bands), these signals are easy to spot, and will help to avoid whipsaw trades in volatile conditions.
The following chart is a close-up of the EUR/USD example above and shows the forex pair on a 20-minute time frame for the continuous period May 23, 2021 to May 27, 2021. The normal RSI is also plotted for comparison. Since the normal RSI would give too many unclear signals marked with "?", the csRSI first filters the high probability time frames according to the integrated multi time frame filter from the 2h chart. In addition, the smooth indicator line allows very precise detection of turns and divergences using the adaptive bands. In the 4-day period shown, there were 2 clear buy and sell signals. The normal RSI would not have been able to filter the wrong signals from the right ones.