Building a Capped RSI Indicator from a Baseline and Sensitivity

Summary

The document explains a simple transformation of the Relative Strength Index (RSI) into a bounded indicator. It takes an RSI value for a selected period and price input, subtracts a baseline, and multiplies the difference by a sensitivity factor. The result is then clipped so values below zero become zero and values above twenty become twenty.

The note characterizes an indicator marketed as smart-money analysis as an RSI-based calculation instead. It provides no parameter-selection guidance, trading rules, market examples, or backtest evidence, so it does not establish whether the transformed RSI has predictive value. The procedure describes an indicator construction rather than a complete trading strategy.

Key ideas

• The indicator starts with an RSI value computed for a chosen period and closing price.
• Subtracting a baseline centers the RSI reading around a reference level.
• A sensitivity multiplier scales the centered RSI deviation.
• The transformed value is bounded between zero and twenty.
• No evidence is given that the indicator predicts prices or improves trading results.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.