RSI PRECISION (ENHANCED RELATIVE STRENGTH INDEX)

Developed in 1978, RSI is a fantastic tool for spotting overbought/oversold market levels, but it has several limitations, especially when it comes to the analysis of weekly and monthly timeframes. For that reason, I have built an enhanced (free) version of RSI, called RSI PRECISION. The new oscillator combines RSI readings with price momentum and volatility, and that makes it ideal for analyzing volatile markets such as Bitcoin or penny stocks. RSI PRECISION also offers a plethora of settings, including crossover/crossunder alerts.

■ You can add RSI PRECISION here on TradingView.com, and of course, it is free. » https://www.tradingview.com/script/irWH8Wkm-RSI-PRECISION/

 

INTRODUCTION TO RSI PRECISION

Created by Giorgos Protonotarios, RSI PRECISION is an oscillator designed to enhance RSI with market momentum and price volatility and make it much more accurate on longer timeframes. The oscillator aims to identify overbought/oversold market levels, and it is ideal for analyzing any volatile financial asset. RSI PRECISION can be used on any timeframe, as the common RSI.

The oscillator is extensively tested and optimized to work properly with any financial-traded asset. However, there is the option to customize settings, in order to better match extreme market conditions.

Image: RSI PRECISION vs CLASSIC RSI on Tesla (Monthly)

 

RSI PRECISION FEATURES

The RSI PRECISION formula combines RSI readings with the periodic measurement of market momentum and price volatility. The key features are:

(1) Enhancing RSI and making it more accurate on longer timeframes, where RSI readings are hardly readable

(2) Identifying overbought/oversold market levels in a simple and user-friendly manner

(3) Making precise calculations near market tops and bottoms, where price volatility is always booming

(4) Offering the chance for experimentation by including a plethora of different settings

 

RSI PRECISION FORMULA

The RSI PRECISION formula incorporates three (3) main components:

(a) RSI Component (includes the Relative Strength Index readings on the corresponding period)

(b) Price Momentum/Volatility Component (measured on a periodic basis, and always according to the selected time frame)

(c) RSI Volatility Measurement (optional, by default, is set to zero)

Image: RSI PRECISION vs CLASSIC RSI on Bitcoin (Monthly)

As you can see on the above chart, RSI PRECISION offers a considerably more accurate visualization of the price action than the classic RSI. The SETTINGS on the left include several options such as altering the weight of the RSI equation or the weight of market volatility.

 

RSI PRECISION SETTINGS

There are plenty of parameters to make the oscillator compatible with any market conditions. Negative values are allowed.

(i) RSI PERIODS

You can typically use RSI PRECISION on a 14-period timeframe, as the common RSI. However, you can also use RSI PRECISION on a 21-period timeframe. By default, it is 14.

(ii) RSI FACTOR (%)

This option allows the modification of the basic RSI weight in the formula. If you decrease the weight of the RSI Factor, RSI PRECISION becomes more sensitive to market volatility. It is recommended to use the default value of 100%.

(iii) PERIODIC PRICE VOLATILITY (%)

This option allows the adjustment of price momentum and volatility in the formula. If you enter the value=0, then the formula becomes basically the classic RSI. It is recommended to use the default value of 100%.

(iv) PERIODIC RSI VOLATILITY (%)

This option allows the usage of an extra measurement of volatility. This component focuses entirely on the periodic RSI volatility, and not on price volatility as the previous component (PERIODIC PRICE VOLATILITY). By default, it is 0%.

(v) CROSSOVER/CROSSUNDER LEVELS

RSI PRECISION incorporates adjustable visual alerts (green/red arrows) on any significant crossover/crossunder. By default, the values are 99/1.

(vi) BASE LEVEL

The BASE LEVEL refers to the value of market equilibrium. Below the BASE LEVEL, RSI PRECISION is colored in red. Above the BASE LEVEL, RSI PRECISION is colored in black. By default, it is 50.

 

 

FINAL WORDS REGARDING RSI PRECISION

If you are an RSI trader, change to RSI PRECISION and soon find out that it works better than the classic RSI. RSI PRECISION is considerably more accurate on longer timeframes, especially as concerns spotting market tops/bottoms.

 

■ You can add RSI PRECISION here on TRADINGVIEW, for free...

» https://www.tradingview.com/script/irWH8Wkm-RSI-PRECISION/

  

□ Giorgos Protonotarios

for TradingCenter.org (c)

April, 4th, 2021