RSI On SteroidsThe RSI On Steroids indicator combines the Relative Strength Index (RSI) with the Augmented Dickey-Fuller (ADF) test to enhance trend identification and reduce market noise. This hybrid approach allows traders to detect stronger market movements with greater accuracy, making it useful for both trend confirmation and mean-reversion strategies.
By integrating RSI’s momentum-based insights with the ADF test’s statistical validation of trend persistence, this tool helps filter out weak signals, improving overall market analysis.
How It Works
- The RSI component measures momentum and overbought/oversold conditions based on user-defined upper and lower bands.
- The ADF test analyzes price action, determining whether the market is trending or reverting to a mean.
- Moving Average (MA) smoothing can be applied to both RSI and ADF values, helping to refine signals and reduce short-term fluctuations.
- Threshold levels for both indicators allow for the identification of breakout opportunities or mean-reversion setups.
- Optional bar coloring and background visualization improve clarity, highlighting bullish and bearish conditions.
How to Use It
1. Trend Confirmation & Reversals:
(a) If RSI breaks above the upper band, it signals strong upward momentum.
(b) If ADF crosses above its threshold, it validates a potential trend breakout.
(c) When both RSI and ADF align, the signal is stronger, confirming momentum shifts or trend continuations.
2. Smoothing for Noise Reduction:
(a) Enable MA smoothing to filter out short-term fluctuations and identify clearer signals.
(b) Choose from SMA, EMA, VWMA, WMA, HMA, and RMA to match market conditions and trading preferences.
3. Visual Cues for Decision Making:
(a) Bar and background colors dynamically update based on market conditions.
(b) RSI and ADF plots (optional) allow deeper analysis for traders who prefer visual confirmation.
Default Settings & Recommended Usage
- RSI Period: 16
- RSI MA Length: Enabled 10, EMA
- Upper RSI Band: 54 | Lower RSI Band: 22
- ADF Lookback Period: 20
- ADF MA Smoothing: Enabled 34, EMA
- Upper ADF Threshold: -1.45 | Lower ADF Threshold: -2.3
- Default Settings Adjusted for 2D timeframe for reliable trend confirmation and reversion signals.
Conclusion
The RSI On Steroids indicator merges momentum analysis (RSI) with statistical validation (ADF test) to offer a more robust and precise approach to trend detection. By filtering out market noise and identifying stronger price movements, traders can gain better insights into trend continuations and reversals.
- Important Note: No trading indicator guarantees future results. Historical performance does not predict future success.
- Strategic Consideration: Traders should fine-tune settings, validate signals with additional analysis, and apply risk management strategies to optimize this indicator for real-world trading.
