Relative Bias Filter for Avoiding Trades Against Trend Strength
Summary
The Relative Bias Filter is a bounded signal intended to help avoid trades against strong directional conditions. Its signal is based on RSI applied to an average of typical price. A move toward the upper threshold indicates bullish strength and discourages shorts; a move toward the lower threshold indicates bearish strength and discourages longs. Crossings back away from those thresholds can suggest setups in the opposite direction, but the document advises validating them with other indicators.
Response controls smoothing: lower values react faster but are noisier, while higher values reduce noise and add lag. Cutoff sets the distance between the strong and weak thresholds. Dynamic mode scales the internal lookback with response; otherwise it is fixed. Complex mode weights the signal using ADX and ADXR, accelerating changes when trend strength is rising and moderating them when it is weakening. The author says this mode can produce more setups and noise. No performance tests or market-specific results are provided, so settings require instrument-specific evaluation.
Key ideas
- The signal uses RSI of an averaged typical price and is bounded by upper and lower thresholds.
- An upper-threshold reading indicates bullish strength and argues against opening shorts.
- A lower-threshold reading indicates bearish strength and argues against opening longs.
- Lower response settings are quicker and noisier, while higher settings are smoother and more delayed.
- Dynamic mode changes the lookback, while complex mode uses ADX-based weighting and may add noise.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.