Description:
RSI with Bollinger Bands is an innovative technical indicator combining two popular tools in the world of trading and investing: the Relative Strength Index (RSI) and Bollinger Bands. The “RSI with Volatility Bands” indicator provides traders a unique way to identify potential market extremes by wrapping the RSI with Bollinger Bands.
Input Parameters:
- Length: Number of periods used in the calculation.
- BB Length: Number of periods used in the calculation in regards to the Bollinger Band portion of the indicator.
- BB Up: Bollinger Band standard deviation of the upper band.
- BB Down: Bollinger Band standard deviation of the upper band.
- Price Source: The specific data points (such as open, high, low, or close) from each candle in a financial chart that an indicator uses for mathematical computations, enabling the calculation of metrics like the average over a specified period.
Use Cases:
- Overbought/Oversold Conditions: To use the RSI with Bollinger Bands indicator, traders should first look for situations where the RSI line breaches the upper or lower Bollinger Bands. When the RSI exceeds the upper band, it signals a potential overbought condition, indicating that a price correction or reversal may be imminent. Conversely, when the RSI drops below the lower band, it suggests an oversold condition, pointing to a potential price increase.
- Volatility Identification: Traders can monitor the width of the Bollinger Bands around the RSI. Narrow bands indicate low volatility, while wide bands signify high volatility. By observing the bands’ behavior, traders can identify market consolidation periods and potential breakouts or reversals.
This feature can be used in:
- Market Scanner
- Strategy Tester
- Multi-Factor Alerts
- Smart Checklist
Do you want to learn more? Check out our Learning Center Article.