Smart RSI Money Flow — Core Bands V1.01

SMART RSI – Money Flow Bands (Technical Overview)


1. Background: RSI and Its Behavior on Lower Timeframes
The Relative Strength Index (RSI) originally is a momentum oscillator calculated from average gains and losses over a selected period. In its standard form, RSI is derived solely from price changes; it does not incorporate volume data or order-flow information in its formula.

Because RSI is price-based, its interpretation depends strongly on the timeframe:

• On higher timeframes, each bar aggregates more trading activity, and RSI tends to behave more smoothly.
• On lower timeframes (1-hour down to intraday scalping intervals), price fluctuations are quicker, and RSI becomes more sensitive to short-term noise.

This does not imply that RSI becomes invalid, but that its signals on fast charts can be more reactive and may benefit from additional context such as volume behavior or structural information.

2. Purpose of This Indicator
This indicator extends the classical RSI by adding information that RSI does not include:
• Mapping RSI values into price-based bands instead of the 0–100 oscillator space.
• Retrieving lower timeframe volume data and separating it into buy and sell components.
• Comparing the slope (angle) of price movement with the slope of buy and sell volume.

The goal is to provide a structural interpretation of where price sits relative to RSI conditions and how volume is behaving on a lower timeframe.

3. Technical Differences Compared to Classical RSI

A) Classical RSI
• Input: price only (usually close).
• Output: normalized oscillator between 0 and 100.
• Does not incorporate intra-bar volume distribution.
• Does not separate buy/sell volume.

B) SMART RSI – Money Flow Bands
1) RSI-to-Price Mapping
Converts RSI values into upper/lower price bands using recent price extremes.
2) Lower Timeframe Volume Decomposition
Retrieves LTF data and splits each bar’s volume into buy (close>open) and sell (close<open) volume.
3) Slope Metrics
Computes slopes of price, buy volume, and sell volume for comparison.
4) Conditional Zones
Highlights regions where price position relative to the RSI bands and volume behavior align.

4. Timeframe and Data Considerations
Since the indicator uses lower timeframe volume (via request.security_lower_tf), historical LTF data may be limited on higher timeframes such as 4H, Daily, or Weekly. For this reason, the indicator is most suitable for:
• 1-hour and lower timeframes
• Intraday and scalping environments

This is a practical limitation based on data availability, not a theoretical restriction.

5. Interpretation of Example Behavior
Near the lower RSI-mapped band:
• Price approaches the lower mapped range.
• LTF buy volume increases or shows a stronger slope.
This suggests short-term buy-side strengthening.

Near the upper RSI-mapped band:
• Price moves near the upper mapped range.
• LTF sell volume increases or has a stronger slope.
This indicates short-term sell-side dominance.

6. Summary
• Classical RSI is purely price-based.
• This indicator adds:
– Price-mapped RSI bands
– LTF buy/sell volume information
– Slope comparisons
– Condition-based highlighted zones
• Designed mainly for low timeframes due to LTF data dependency.