I found an article about RSI MA indicator. So, I asked my mentor, what is an RSI with a moving average indicator? Luckily, he told me this:
RSI with moving average or MARSI is a technical indicator used in trading to get more reliable oversold and overbought signals. Also, anyone can use it to detect trends and find the right spots to enter your trades. The result is a smooth RSI line.
The smoothened RSI line usually creates signals that are more reliable than its traditional relative strength index indicator.
To interpret the MA RSI
When the MA RSI crossed the 70 levels, an overbought signal may arise to signal a downward move. Traders and chartists sell their positions. Traders consider MARSI level below 30 as oversold.
The trading strategy of MARSI is like the traditional RSI indicator. However, traders can apply a simple moving average indicator to the RSI line to get smooth and if possible a reliable mean reversion indicator.
Uptrend usually begins when the MA RSI is below 30 and is rising, while a downtrend often starts when the MARSI is above 70 and is going down.
The best way to use this indicator is to look at the trend lines to understand the market condition.
When a trend is clear, for example, an uptrend, traders can buy stocks when there is an oversold signal.
However, do not just believe me, backtest the indicator alone for three to five years.
If found profitable, improve it by only trading it with a trend.
The look-back period of RSI and Moving average are 30 and 13, respectively. Please optimize it to fit in the market you are trading. Also, optimize the RSI period, use Amibroker.
Moving average RSI
The MA RSI usually follows the price with high precision. It also predicted several reversal areas on the chart.
However, back-testing is important when trading this indicator, because some stocks or securities may react the way which is not expected.
With MA RSI, traders can create a unique strategy or trading system which can increase the edge in the market.
For example, in addition, a Bollinger band can increase the win rate of this indicator.
m=MA(C,13); marsi=RSI(m,30); UL= Param("Upper Limit",70,0,100,1); LL= Param("Lower Limit",30,0,100,1); PlotGrid(UL,colorBlue); PlotGrid(LL,colorBlue); Plot(marsi,"MARSI",colorBlue,styleLine);
Once you learned to code this indicator, you have to backtest it in your Amibroker.
In RSI with a moving average indicator, you’ll have a smooth RSI to decide when to trade.
Johndeo Research has provided this AFL for educational purposes only. Do not use MARSI if you have not back tested it yet.
Finally, if you like our post of RSI Moving Average, please share it with your favorite social networks.
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