RSI Donchian Channel Signals for Directional Trend States
Summary
This indicator applies a Donchian Channel to the Relative Strength Index rather than directly to price. It marks an upward state when the RSI reaches or exceeds the prior upper channel boundary, and a downward state when it reaches or falls below the prior lower boundary. A cross of the channel midpoint resets the state. Background shading or candle coloring can display the active state, and optional moving-average smoothing can be applied to RSI; the description recommends Hull smoothing with a length of eight.
The underlying idea is that RSI breaks and midpoint crossings may anticipate price moving in the same direction and persisting until the next midpoint cross. The document provides indicator logic and parameter defaults, but no tests, market examples, or performance evidence. These signals are therefore a technical-analysis hypothesis, and the chosen lookback, smoothing, and state rules may affect behavior across instruments and timeframes.
Key ideas
- The indicator calculates upper, lower, and midpoint Donchian levels from RSI values.\nAn RSI touch of the prior channel extreme sets a directional state.\nCrossing the prior midpoint clears the directional state.\nOptional moving-average smoothing can be applied to the RSI series.\nThe document states a price-follow-through hypothesis but supplies no empirical validation.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.