RSI of a Smoothed Price Series with Dynamic Thresholds

Summary

This indicator first smooths a selected price series using a configurable moving-average period and method, then calculates RSI on that smoothed series. It adds floating overbought and oversold levels derived from the recent minimum and maximum RSI values over a configurable lookback. The upper and lower thresholds are set as percentages of that observed range, with a midpoint also plotted. The RSI line changes color when it moves beyond either dynamic threshold.

The supplied settings use a 14-period RSI, 21-period price smoothing, and a 50-period range window, with thresholds at 80% and 20% of the recent range. These are example parameters, not tested recommendations. The document contains implementation logic but no chart study, backtest, or evidence that threshold crossings predict reversals or profitable trades. Because the levels depend on a rolling range, their values adjust as the observed RSI extremes change. The indicator is therefore a configurable oscillator display, and its signals require independent evaluation for the intended market and timeframe.

Key ideas

• RSI is calculated on a moving-average-smoothed price series rather than directly on price.
• The moving-average period and method can be adjusted.
• Dynamic upper and lower levels are positioned within the recent RSI minimum-to-maximum range.
• The indicator colors the RSI line when it moves beyond either dynamic threshold.
• The document provides example parameters but no performance evidence or trading validation.

Tags

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