RSI Trend Envelopes Using Volatility-Based Bands and Smoothing

Summary

This indicator replaces fixed-width RSI envelopes with bands whose width is based on the standard deviation of the calculated RSI, adjusted by a multiplier. That makes the envelope width responsive to variation in the RSI rather than keeping it at a constant value. The description does not specify the multiplier or provide rules for interpreting band crossings as entries or exits.

The RSI can be smoothed before the envelopes are calculated, using a simple, exponential, smoothed, or linearly weighted moving average. A smoothing period of one or less disables this step, which the description presents as a way to reduce false signals. Its displayed RSI is constructed from RSI calculations on high, low, and close prices, then combined and divided by thirty. No comparative tests, trading results, asset scope, or parameter guidance are supplied, so the text explains the indicator construction but does not establish its predictive value.

Key ideas

• The envelope width is derived from the standard deviation of RSI and an adjustable multiplier.
• The RSI input can be smoothed with one of four common average types.
• A smoothing period of one or less disables pre-smoothing.
• The displayed RSI combines RSI values calculated from high, low, and close prices.

Tags

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