actio-et-reactio
Balance is but a brief transition between extremes.
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Sunday, May 01, 2005
Expanded RSI scale
Long time users of RSI know that, although an oscillator, RSI also channels, rarely staying in the 20/80 extremes for very long, but staying within a 45/65 or 25/55 channel. Constance Brown shares this and other Andrew Cardwell observations on standard RSI in her book
Technical Analysis for the Trading Professional. This feature, while a bonus, can also be frustrating as the indicator often flattens in the center of the channel.
An
Inverse Fisher Transform of RSI is one alternative. As you can see in the chart, inflections at major reversals are captured and it stays in the zone above 80 (or below 20) while trending. However, there is some loss of intra-trend oscillations ("slings").
To bridge these two options, another solution is to expand the indicator scale, which sort of "magnifies" the plot. A benefit if sharing your work with others who may be unfamiliar with the Fisher-ized RSI.
This template for Ensign users does just that.
Labels: ensign, indicators
At last, over the rim
of the waiting earth
the moon lifted with
slow majesty
till it swung clear of the horizon and rode off,
free of moorings
- Kenneth Grahame,
The Wind in the Willows
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