Dynamic Momentum Index: Volatility-Adaptive RSI Periods and Threshold Signals

Summary

The Dynamic Momentum Index adapts the effective RSI period to recent price volatility. The document describes estimating volatility from a short standard deviation smoothed by a longer average, then using that estimate to vary the period within stated upper and lower bounds. In the script, this variable period feeds an RSI calculation, with low and high threshold zones setting persistent long and short states. A setting can reverse those directions, and the indicator colors bars to reflect the resulting position state.

The rationale is that shorter effective periods in active markets make the measure more responsive, while longer periods in quiet markets provide more smoothing. The document explains the calculation concept and includes a simple strategy implementation, but reports no backtest results, market-specific evaluation, or transaction-cost analysis. The thresholds and bounds are adjustable inputs, so their usefulness and behavior require testing on the intended instrument and timeframe.

Key ideas

• The indicator varies its effective RSI period in response to recent volatility.
• A short standard deviation smoothed over a longer window supplies the volatility estimate.
• The script bounds its adaptive period between configured minimum and maximum values.
• Low and high RSI zones establish persistent long and short states, with an option to reverse them.
• The document explains the method but supplies no evidence of strategy performance.

Tags

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