Price Strength Index + RSI Buy/Sell Zones

3 thg 9, 2023

The Price Strength Index + RSI Buy/Sell Zones indicator is a technical analysis tool designed to evaluate the strength of a financial asset's price movement by comparing it with a series of Volume Weighted Moving Averages (VWMAs) of different lengths calculated from historical data.

Hypothesis:
The core hypothesis behind this indicator is that assessing the relationship between the current price and a range of VWMAs with varying lengths can provide valuable insights into the strength and direction of a price trend. Additionally, it incorporates Relative Strength Index (RSI) conditions to further refine potential buy and sell signals.

How It Works:

Multiple VWMA Calculation: The indicator calculates multiple VWMAs, each with a different length, using historical price data and volume. These VWMAs represent weighted moving averages over various periods, helping to capture different aspects of the price trend.

Comparison with Current Price: For each of these VWMAs, the indicator compares the current bar's price with the VWMA value. This comparison is crucial in understanding how the current price relates to historical averages, shedding light on the strength and direction of the prevailing trend.

SMA of Percentage Above VWMA: The indicator calculates the Simple Moving Average (SMA) of the percentage of prices above the various VWMAs over a specified period. This moving average smoothens out the percentage data, providing a clearer trend signal.

Buy and Sell Zones: User-defined upper and lower thresholds for the percentage of prices above the VWMAs are used to define buy and sell zones. When the percentage falls below the lower threshold, it signals a potential buy zone, suggesting a weakening trend. Conversely, when it exceeds the upper threshold, it signifies a potential sell zone, indicating a strengthening trend.

RSI Integration: The RSI is calculated for the selected price source with a specified length. When the SMA of the percentage above VWMAs falls within the buy zone and the RSI is below the lower RSI threshold, it indicates an oversold condition, potentially signaling a buy opportunity. Conversely, when the SMA falls within the sell zone and the RSI is above the upper RSI threshold, it suggests an overbought condition, possibly signaling a sell opportunity.

Color Coding: The indicator employs color-coding to visually represent the buy and sell zones, as well as extreme RSI conditions. Green color denotes the buy zone, red represents the sell zone, and orange lines indicate the median and potential reversal points.

In summary, the Price Strength Index + RSI Buy/Sell Zones indicator leverages multiple VWMAs of different lengths to assess the relationship between current prices and historical moving averages. This comprehensive analysis, coupled with RSI conditions, aids traders in identifying potential buy and sell zones, as well as extreme RSI points within those zones, enhancing the evaluation of price strength and potential trend reversals.

3 thg 9, 2023

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Change Log:

Inverted Color Scheme: The color scheme has been inverted in this update. Now, red represents the buy zone, while green signifies the sell zone. This change enhances visual clarity and aligns the color scheme with the corresponding zones for easier interpretation.

Adjusted Minimum Value for Strength Index's SMA Length: The minimum value for the Strength Index's SMA Length has been adjusted to 1 in response to user feedback. This change allows users the option to rely on less smoothed indicator results, providing greater flexibility in tailoring the indicator to their specific analytical preferences.

3 thg 9, 2023

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Code refactor

7 thg 9, 2023

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Modification History:

Introduced color coding for the PSI Index line to represent trends (green signifies an uptrend, while red indicates a downtrend).
Performed code refactoring for optimization.

9 thg 9, 2023

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Incorporated an indicator description as comments within the code to provide better context and understanding

1 thg 2

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Added top/bottom zones and buy/sell signals alerts