Alerts: Relative Strength Index Trend

There are many uses for the Relative Strength Index (RSI) study.  Most focus on looking for divergence between RSI and the chart action.   Click this link for more information about the Fundamental Behavior of RSI.   But this article will show how to use RSI in a different way.  RSI will be used to indicate whether the market is trending and its direction.

The rules which define the RSI Trend indicator are:

• Use a 9 period parameter for the RSI study
• An Up Trend will start with RSI crossing above 70, and
• The Up Trend continues while RSI remains above 40.
• A Down Trend will start with RSI crossing below 30, and
• The Down Trend continues while RSI remains below 60.

This RSI Trend indicator can be implemented in Ensign Windows using the RSI study and 6 Alert objects.

Four of the alerts are used to track the RSI conditions of RSI >= 70, RSI >=60, RSI <=40, and RSI <=30.  These alerts and then used to turn on or off the Green and Red zone coloring.  Only one of the property forms for these 4 alerts is shown here.  The other 3 are similar, with a different Field selection in panel A.

The next Alert is the logic for the Up Trend and creates the green zone coloring on the chart.

The final Alert is the logic for the Down Trend and creates the red zone coloring on the chart.

Let's discuss the logic of the last alert in greater detail.    Panel A returns the number of Bars Since the RSI < 30 Alert was true.  Panel B returns the numbers of Bars Since the RSI > 60 Alert was true.  If the Panel A value is a smaller number than the Panel B value, then RSI < 30 happened more recently than RSI > 60.  Therefore, the Down Trend is still in effect and a light red ZONe marker is used to display this True condition.

Likewise, the Up Trend is in effect as long as the RSI > 70 event happened more recently than the RSI < 40 event.  That is the logic tested in the previous alert the does the light green zone coloring.

A template for the RSI Trend indicator can be downloaded from the Ensign web site.  Click menu File | Open | Internet Services.  Click the Upgrade tab.  Click the Template bullet and select  RSI-Trend  in the drop down list.   Click the Download button to get the template.