RSI PRECISION (AN ADVANCED RELATIVE STRENGTH INDEX)

Developed in 1978, RSI is a great tool for identifying overbought and oversold market levels, but it has limitations, especially on weekly and monthly timeframes. For this reason, I created an enhanced (free) version called RSI PRECISION. This new oscillator combines RSI readings with price momentum and volatility, making it ideal for analyzing volatile markets like Bitcoin or penny stocks. RSI PRECISION also offers many settings, including crossover and cross-under alerts.

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

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INTRODUCTION TO RSI PRECISION

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

The oscillator has been extensively tested and optimized to work with any tradable financial asset. Users can also customize the settings to better adapt to extreme market conditions.

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

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RSI PRECISION BASIC FEATURES

The RSI PRECISION formula combines RSI readings with periodic measurements of market momentum and price volatility. Its 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

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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 periodically, 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 shown in the chart above, RSI PRECISION provides a much more accurate view of price action than the classic RSI. The settings on the left include several options, such as adjusting the weight of the RSI calculation or the weight of market volatility.

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RSI PRECISION SETTINGS

There are many parameters available to make the oscillator compatible with any market conditions. Negative values are also 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 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 adds an extra measure of volatility. Unlike the previous component, it focuses entirely on periodic RSI volatility rather than price volatility (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 the 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.

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FINAL WORDS REGARDING RSI PRECISION

If you trade with RSI, switch to RSI PRECISION, and you’ll quickly see that it outperforms the classic RSI. RSI PRECISION is much more accurate on longer timeframes, especially for identifying market tops and bottoms.

• More sensitive to significant changes in market momentum than RSI

• Often reveals divergences on long timeframes, where the classic RSI shows convergences

• Better suited for trading volatile markets, such as cryptocurrencies and low-cap stocks

 

🔗 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