Dynamic RSI with Adaptive Overbought and Oversold Levels

Summary

This document presents a modified RSI indicator with thresholds that adapt to the recent range of RSI values. It calculates a standard RSI over a 14-period window, then uses the highest and lowest RSI readings from a 60-period lookback to construct a central reference and upper and lower zones. A weighted blend of the current and prior RSI readings forms the displayed oscillator, and its color changes according to its position relative to the center line.

The upper and lower bands are intended to mark dynamic overbought and oversold areas, with chart highlighting when the oscillator crosses them. The document explains the indicator’s calculation and says its code was converted from an Amibroker version. It does not define trading entries or exits, provide backtests, or report performance, so the bands should be treated as an indicator design rather than a validated standalone strategy. Its behavior will depend on the selected lookback and RSI settings.

Key ideas

• The indicator smooths RSI using a weighted combination of the current and three prior readings.
• Its upper and lower reference zones are derived from recent RSI highs and lows rather than fixed levels.
• A central reference line and color changes provide additional context for the oscillator’s position.
• The document provides calculation logic but no tested trading rules or performance evidence.

Tags

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