Smoothed RSI indicator with EMA


Smoothed RSI indicator with EMA cover

Let’s see how to create our smoothed RSI indicator by using a Moving Average with Easylanguage.

For this example, we will use an RSI, and we will go to create two indicators.

The first is a classic indicator and be placed below the graph. Another indicator is a PaintPar that will color the candles according to the trend.

The yellow line is the normal ATR while the red line is the smooth ATR through its 10-period average (2-weeks).

RSI-SMOOTH

The normal RSI is very fast and more susceptible to random market movements.

How to create the smoothed RSI:

The formula in Easylanguage to “smooth” and make a series of data slower as the RSI line is this:

RSI_VALUE = RSI(Price, Length);
RSI_SMOOTH = Average (RSI_VALUE, Smooth);

This indicator is very useful as a trend filter.

We then build a PaintBar indicator that will color the candles green when the ATR is above 50 and red when the ATR is below.

rsi-smooth-paint-bar

The PaintBars available on TradeStation and Multicharts are very useful to get an immediate idea of ​​the current trend.

If we compare the PaintBar calculated with the standard RSI length, we see that have fewer signal changes.

relative-strength-index-tradestation

Some traders use the RSI crossing above and below 50 to open long and short positions, but from the tests carried out, it is not a robust strategy.

RSI-signals

It is, therefore, preferable to use this indicator exclusively to identify the primary trend.

 

Resources:

INVESTOPEDIA: Relative Strenght Index

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