Cyclic Smoothed RSI

This indicator is an MQL5 port inspired by the "Cyclic Smoothed RSI" concept originally developed by Dr_Roboto and popularized by LazyBear and LuxAlgo on TradingView.

The Cyclic Smoothed RSI (cRSI) is an oscillator designed to address the two main limitations of the standard RSI: lag and fixed overbought/oversold levels. By using digital signal processing (DSP) based on market cycles, the cRSI reduces noise without sacrificing responsiveness. 

It features Adaptive Bands that expand and contract with market volatility. This allows the indicator to remain effective during both trending (high volatility) and lateral (low volatility) market conditions, where standard fixed levels (70/30) often fail.

Key Components

• cRSI Line (Black): The main oscillator line, smoothed using cycle-period logic.

• Signal Line (WMA - Purple): A Weighted Moving Average of the cRSI. Crosses between the cRSI and the Signal Line indicate short-term momentum shifts.

• Adaptive Bands (Green/Red): Dynamic upper and lower boundaries that adjust to recent price ranges.

• VWMA Overlay (Main Chart): A Volume-Weighted Moving Average plotted on the price chart to provide trend context.

How to Use: Practical Scenarios

1. Identifying Compression and Breakouts (Volatility Squeeze) Markets cycle between low volatility (compression) and high volatility (expansion). The Adaptive Bands visualize this cycle.

• Compression: When the Upper and Lower bands move closer together, it indicates the market is entering a low-volatility "squeeze." This is often a precursor to a significant price move.

  • Signal: Watch for the cRSI to break out of the squeezed bands. This often marks the start of a new trend.

• Expansion: When the bands widen significantly, volatility is high. If the cRSI line stays "pinned" to the upper or lower band during expansion, it confirms a strong trend. Avoid counter-trend trading during these expansions.

2. Trading Lateral (Sideways) Markets In a ranging market, price lacks a clear direction. The Adaptive Bands automatically contract to fit the range, providing dynamic support and resistance levels.

3. Spotting Reversals and Continuations (Divergences) The indicator automatically detects and labels four types of divergences to help you identify reversals or trend continuations.

• Regular Divergence (Possible Reversal)

  • Bullish: Price makes a Lower Low, but cRSI makes a Higher Low. This suggests selling pressure is fading and a reversal up is likely.

  • Bearish: Price makes a Higher High, but cRSI makes a Lower High. This suggests buying pressure is fading and a reversal down is likely.

• Hidden Divergence (Trend Continuation)

• Hidden Bullish: Price makes a Higher Low (in an uptrend), but cRSI makes a Lower Low. This suggests the dip is an opportunity to buy for trend continuation.

• Hidden Bearish: Price makes a Lower High (in a downtrend), but cRSI makes a Higher High. This indicates a "cool off" in the oscillator during a downtrend and suggests the downward trend will continue.

• Trend Confirmation: Use the VWMA to filter your oscillator signals. If the VWMA is sloped upward (Green), look primarily for Buy signals. If sloped downward (Red), look primarily for Sell signals.

• InpDomCycle: The Dominant Cycle Length (Default: 10). Controls the sensitivity of the cycle smoothing.

• InpCrsiMaLen: Length of the Signal Line (WMA).

• InpShowVWMA: Toggles the main chart overlay on/off.

• InpTopBottomLookback: Sensitivity for detecting tops and bottoms for divergence calculations.

Note: This tool is a port of the Cyclic Smoothed RSI strategy originally designed for TradingView. The indicator alone is not perfect, please use it responsibly when integrating it in your trading strategy

Risk Disclaimer