How the Derivative Oscillator Smooths RSI into a Momentum Histogram

Summary

The Derivative Oscillator applies the MACD histogram idea to a twice-smoothed RSI. RSI is calculated first, then smoothed with two exponential averages; a simple moving average of that result becomes the signal line. The oscillator is the difference between the smoothed RSI and its signal line, displayed as a histogram. The document attributes the indicator to Constance Brown and gives default settings of RSI 14, smoothing periods 5 and 3, and signal period 9.

Its example colors histogram bars according to whether the oscillator is above or below zero and whether it is rising or falling. This offers a visual view of momentum changes, but the document provides no tested trading rules, performance evidence, or guidance on markets and time frames. It describes an indicator construction, not a standalone strategy.

Key ideas

• The oscillator applies two exponential smoothing steps to RSI.
• A simple moving average of the smoothed RSI serves as the signal line.
• The histogram measures the gap between the twice-smoothed RSI and its signal line.
• The example colors bars using the oscillator’s sign and direction of change.
• The document does not provide performance evidence or a complete trading strategy.

Tags

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