Regression Sloped RSI [QuantraSystems]

2024年2月22日

Regression Sloped RSI

Introduction
The Regression Sloped RSI (𝓡𝓢-𝓡𝓢𝓘) enhances the classical RSI by incorporating a form of linear regression analysis, which adjusts the traditional RSI in relation to the calculated slope over a specified lookback period.

Its innovative approach reduces the occurrence of false signals compared to the classical RSI. Furthermore, it is particularly effective in markets characterized by strong trends. This is because it responds faster while retaining a high level of whipsaw resistance. The Heikin-Ashi style processing is critical to this.

It also provides robust reversal signals from dynamic overbought and oversold zones to further enhance mean-reversion trading.



Legend
The coloring of the 𝓡𝓢-𝓡𝓢𝓘 changes based on trend direction: A bright green when upwards, lilac when downwards. The strength of the trend is expressed in its distance to Null. Its acceleration is found in the Heikin-Ashi (HA) candles.

The 𝓡𝓢-𝓡𝓢𝓘 in combination with the HA bars can be used to achieve earlier entries, when the former passes across the latter in an obvious divergence.



Case Study
In this example the 𝓡𝓢-𝓡𝓢𝓘 is used to make a few intra-day trades on the Ethereum 15 minute chart. Each trade was open for approximately 5 hours. On the first trade we enter a long in an early entry. The indicator gives us three confirmations which we should all check for. First we have a positive candle developing, secondly the 𝓡𝓢-𝓡𝓢𝓘 (line) rises above the Heikin-Ashi candles, thirdly the classical RSI (the saturated surface in the background) rises as well.

The trader should then calculate their position sizing responsibly and enter into a short daytrade. Please always have invalidation rules, for example a) if the initial HA candle closes negative b) you can place your stop loss at 1SD into the opposite direction.

• Always use adequate risk management, never risk more than 1% of your portfolio, unless you are a seasoned trader with your own calculated position sizes.
  
• Always forward test your rules, assets, timeframe and settings sufficiently.
  
• It is always recommended to use multiple Quantra indicators to add confirmations to your signals - this is by design.
  

Recommended Settings
Please reset to defaults before enabling recommended settings.

Intra-Day Trading (15min chart)
RSI Length: 22
LR Length: 25
Smoothing: EMA
Toggle SD Bands: On
Mode for Coloring: Candles

Trend Following (4H chart)
RSI Length: 40
LR Length: 35
Smoothing: LSMA
Toggle SD Bands: Off
Mode for Coloring: Extremes or Trend Following



Notes
Quantra Standard Value Contents:
The Heikin-Ashi (HA) candle visualization smoothes out the signal line to provide more informative insights into momentum and trends. This allows earlier entries and exits by observing the indicator values transformed by the HA.

Various visualization options are available to adjust the indicator to the user’s preference: Aside from HA, a classic line, or a hybrid of both.

A special feature of Quantra’s indicators is that they are probabilistically built - therefore they work well as confluence and can easily be stacked to increase signal accuracy.

To add to Quantra's indicators’ utility we have added the option to change the price bars colors based on different signals:

Choose Mode for Coloring

• Trend Following (Indicator above mid line counts as uptrend, below is downtrend)
  
• Extremes (Everything beyond the SD bands is highlighted to signal mean reversion)
  
• Candles (Color of HA candles as barcolor)
  
• Reversions (Only for HA) (Reversion Signals via the triangles if HA candles change trend while beyond the SD bands, high probability entries/exits)
  

1. The 𝓡𝓢-𝓡𝓢𝓘 is finely tuned to detect divergences.
   
2. Primarily utilized for trend following, the 𝓡𝓢-𝓡𝓢𝓘 also demonstrates effectiveness in identifying reversions, intensity of movements and the navigation of range-bound markets.
   
3. Allows for easy identification of slowdowns in momentum and thus negative rate of change.
   

Methodology
The 𝓡𝓢-𝓡𝓢𝓘 takes the classical RSI using a specified lookback length and computes the slope of a linear regression line applied to the RSI values. This slope is used to adjust the RSI.

• This sloped RSI can be further smoothed using various Moving Averages with customizable lengths.
  
• For a more nuanced view of market trends, the 𝓡𝓢-𝓡𝓢𝓘 applies a specialized Heikin Ashi method. This transformation modifies the Sloped RSI values in order to weigh and reflect the average price, offering a smoother representation compared to traditional candlestick patterns.
  
• The 𝓡𝓢-𝓡𝓢𝓘 calculates upper and lower bounds based on a specified standard deviation multiplier and adjustable lookback period, providing a dynamic framework to identify extrema and thus overbought and oversold conditions.
  
• Particularly in the Heikin Ashi mode, the 𝓡𝓢-𝓡𝓢𝓘 can display reversion signals. These are plotted as shapes on the chart, indicating high probability reversal points in the market trend.
  

2024年3月14日

版本注释

Added 'Dynamic' capabilities.
Added 'Compressed Signal Mode'.

2024年10月15日

版本注释

• Cleaned up input menu for more uniform structure.
  
• Added signal table.