Indicators: Normalized RSI
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Normalized RSI:
Some indicators are working equal for all calculation lengths some are not. One example that is not is RSI. Even though it is taken for granted that it oscillates in 0-100 range (so it is normalized already) and regardless of it's obvious usefulness, every serious study stresses not to use lengths > 10 for RSI.
The "RSI problem" is simple: the longer the calculating period, the flatter the RSI becomes. Here is an example of a 50 period RSI:
As it is obvious, it is hardly usable for anything in the original for such a long calculating periods. There were quite a few attempts to change that: Smoothed RSI (that partially avoids that trap, but it quickly looses the advantage over standard RSI), Inverse Fisher Transform of RSI (which also is flattened after some time - here is a comparison of RSI 50 and Inverse Fisher Transform of 50 RSI), and some more.
This is one more way that it can possible be done. Here is the example of the same RSI from above but "normalized" to -50 to +50 range:
Some of the issues that were observed are fixed and, the most important, "flattening" is not there any more.
PS: some experimenting is advised (as usual when it comes to "experiments" like these).
Author: Mladen Rakic