SVEStochRSI

Description

SVEStochRSI is a modification of the Stochastic RSI oscillator introduced by Sylvain Vervoort. Instead of just positioning the RSI value within the high-low range of RSI, this oscillator calculates the average relative position and the regular high-low range is replaced by its average value. Using average values instead of regular ones allows the oscillator to take into account more data and smooth out plot irregularities.

SVEStochRSI can be used for confirmation of trend reversals/continuation based on divergences and convergences of price and indicator:

  • Positive divergence occurs when the price makes a lower bottom while the oscillator makes a higher one. This may signify a trend reversal.
  • Positive convergence occurs when both the price and the indicator are in uptrend while making a higher top or bottom. In this case, trend is likely to continue.
  • Positive hidden divergence is detected when the price shows a higher bottom while oscillator shows a lower bottom. In this case, trend is also likely to continue.
  • Negative divergence is detected when the price hits a higher top, but the oscillator shows a lower top. Trend reversal is possible.
  • Negative convergence appears when both the price and the indicator are decreasing while making lower tops or bottoms. This may signify continuation of the downtrend.
  • Negative hidden divergence is observed when the price makes a lower high while the indicator hits a higher high. This may confirm continuation of the downtrend.

Input Parameters

Parameter

Description

rsi length The length used to calculate the RSI.
stoch length The period on which RSI range is to be found.
average length The length used to calculate the moving averages.
over bought The overbought level.
over sold The oversold level.
show breakout signals Set this parameter to "no" to hide breakout signals. The signals are given when the StochRSI plot crosses above the oversold level or below the overbought level.

Plots

Plot

Description

StochRSI The SVEStochRSI oscillator plot.
OverBought The overbought level.
OverSold The oversold level.
UpSignal A signal given when StochRSI crosses above the oversold level.
DownSignal A signal given when StochRSI crosses below the overbought level.

Further Reading

1. "The V-Trade. Part 6: Technical Analysis -- Divergence Indicators" by Sylvain Vervoort. Technical Analysis of Stocks & Commodities, August 2018.

Example*

*For illustrative purposes only. Not a recommendation of a specific security or investment strategy.

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