Building a Two-Way RSI Indicator for Trend and Range Signals
Summary
The article shows how to extend RSI into a single indicator that supplies signals for both trend-following and range-oriented strategies. It develops the indicator in stages, adding buy and sell buffers, signal counters, more complete signal handling, chart-window display, and a method for identifying valid bars. ATR is added as a volatility input, and filtering rules help refine the signals. The implementation uses object-oriented classes so multiple indicators, including an auxiliary filter, can be combined behind one interface for an Expert Advisor.
The examples explain how RSI boundary crossings can be interpreted as break-ins or break-outs, with normal and reversed variants. The article also warns that simple RSI crossings can produce false entries and drawdowns: its chart examples show that an oversold crossing may occur repeatedly during a sustained decline. The indicator is a software framework for packaging and customizing signals, not evidence that the resulting rules are profitable. Its usefulness depends on the chosen settings, filters, market conditions, and further testing.
Key ideas
- The indicator adds separate buffers for buy and sell signals to a standard RSI calculation.
- Boundary crossings can represent break-in or break-out signals, with reversed modes changing trade direction.
- Signal counters and valid-bar checks help manage repeated signals and avoid calculating on unsuitable bars.
- ATR and auxiliary indicators can be incorporated as filters within an object-oriented design.
- RSI crossings can fail repeatedly during persistent price moves, so the framework does not establish profitability.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.