Price Strength Index [FT]

14 Eyl 2021

The original oscillator indicators such as MACD, RSI and Stochastic are all range-bound, it is always between 0 and 100. That makes it a useful indicator of overbought and oversold conditions. However, it is less reliable when a price is on a strong bullish/bearish trend as it may move higher/lower than the suppose range bound. When price is on a strong trend, the indicator is possibly near to max out at overbought/oversold level and it is unable to show if that momentum is still going because the indicator is tapped at 100 (overbought) or 0 (oversold).


What it does:
This indicator is based on those original oscillators and removing the range bound to give it a much accurate take of price movement. The way to use this indicator is similar to how you would use other similar oscillator (ie. RSI, MACD, Stochastic), to have a view of bullish/bearish momentum. Divergence that appear on the indicator would be shown as an important reversal signal. For example, when price shows a bearish trend that reaches a new/equal Low, the indicator presents a higher/equal Low, it may be a sign that bears are exhausted and a reversal is brewing.

There is also the option to include Volume as weight to the calculation. This may give a much clearer view of a price movement with the context of Volume. It is highly recommended to use a much lower P Length (recommend: 5), so that the indicator would calculate for less smoothing and make it easier to spot for peak/trough.

The Zero line can be used to separate between bullish/bearish area. When indicator is above it, this shows strength on bullish side and when it is below Zero, it means that price would appear more bearish. It could also be use as a mean of normal/value. When the indicator is on the extreme peak/trough, it is likely to make a reversal. Like how a rubber band would return to normal after you have stretch it too far.


Why is this indicator useful ?

• It is best used to analyse for bullish/bearish momentum.
  
• When divergence appear indicating bullish/bearish momentum is exhausted, and looking to reverse.
  
• When price action is currently on a minor pullback and the indicator is now showing that it is making a higher Low(going Long) or lower High(going Short), indicating a possible continuation of a trend.
  
• When indicator is on extreme peak/trough, to look for a potential reversal.
  

DISCLAIMER: Nothing in this content should be interpreted as financial advice or a recommendation to buy or sell any sort of security, investment, currencies or assets.

14 Eyl 2021

Sürüm Notları

Example and comparison of Price Strength Index vs RSI

15 Eyl 2021

Sürüm Notları

v.110, 2021.09.15

• fixed a bug where indicator went to extremes (in millions of values)
  
• added a max and min value of indicator (refer to release note)
  

Release note v.110:
There are times when the indicator would calculate to the extreme. I find that when the indicator does this it is less useful aside from pointing that this is the extreme. So, I've set a max and min limit value to it so that it could act within a specific range that I find acceptable. So, if a ticker do reach to that max, min of the indicator (which is highly unlikely), it is likely to pullback.

23 Eyl 2021

Sürüm Notları

v.111, 2021.09.23

• lowering the default min max range to -6:Zero:6 for better visibility
  
• added option to adjust min max range
  
• added Neutral/Zero zone
  
• removed Volume Weighted option
  

RELEASE NOTE v.111
It looks like the min max range of -10:Zero:10 made the indicator somewhat harder to see if you scale out your chart. So, I've reduce it to default value of -6:Zero:6 for improved visibility. I've also added
an option to adjust the min max field.

Removed Volume Weighted option as it is not used.

26 Eyl 2021

Sürüm Notları

Minor bug fix.
v.112, 2021.09.26

• Min and Max value of P can now be set to the lowest value, 1
  
• Minor fix on smoothing of P
  

27 Eyl 2021

Sürüm Notları

v.200, 2021.09.28

• Added the option to include/exclude calculation on extended session.
  

Release Note: v.200
The indicator can be misleading on extended session due to no volume, no ranges on candles and sometimes prices jumps because of spread and that can make the calculation somewhat to the extreme. The regular hour should always be the main focus as that is when ALL participants of the market is trading. I've added the option to exclude/include the calculation of extended session.

21 Ara 2021

Sürüm Notları

v.201, 2021.12.21 (Finalised version)

• Changed the default values of the indicators.
  
• Finalised version
  

RELEASE NOTES: v.201
This indicator was made in mind, of a simplified version of an oscillator, with the intention of it to be like an index (ie, RSI). Like any oscillator, it helps in identifying/predicting price directions, however being only an index, there are plenty of false positives/negatives. As such, I've added a second indicator and this changes how it works as an index. With the second indicator in play, it becomes more like an oscillator (ie. MACD, Stoch). A fast-slow oscillator would visualised how the slow indicator would react based on the fast indicator and this gives a much better ideas compared to a standalone index.

Another changes that was made is that the MinMax value of the indicator is now recommended to just +-3. I would say, look at it like a percentage. If the indicator tries to go over +-3, that means its trying to go over +-300% in that price direction. Now if you overlay this with a standard indicators, it would show that it is now in the overbought/oversold area.

This is the finalised version of this indicator. Bug reports are welcome, but there won't be any new features.
It is recommended to use these pair values (fast, slow) as a starting point: (3, 8), (5, 13) or (8, 21)
Personally I am using (3, 8) because I am trading at a smaller timeframe 5m, in the direction of a larger timeframe 15m, D.