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Note: This download requires NinjaTrader 8 release 8.1.3 or newer.

Discover the Advanced Derivative RSI with Divergence

Introducing the Derivative RSI - Divergence, an advanced trading indicator designed for NinjaTrader. This powerful tool combines the concept of Relative Strength Index (RSI) with smoothing and divergence detection capabilities to provide traders with a comprehensive analysis of market trends.

Understanding Derivative RSI

The Derivative RSI is a refined version of the traditional RSI, designed to highlight momentum shifts and potential reversals in the market. Unlike the standard RSI, which is calculated using a single period, the Derivative RSI uses multiple smoothing periods to create a more stable and reliable indicator. This indicator leverages the difference between a double-smoothed RSI and a moving average applied to the RSI, providing a more nuanced view of market strength and weakness.

Originally created by Constance Brown, this indicator has been enhanced to allow users to customize all internal periods, giving traders greater control and flexibility.

Customizable Averaging Methods

Our Derivative RSI indicator offers extensive customization options for averaging methods, allowing traders to tailor the indicator to their specific needs. The following averaging methods are available:

1. Simple Moving Average (SMA): A straightforward average of the past prices.
2. Exponential Moving Average (EMA): Places more weight on recent prices, making it more responsive to new information.
3. Hull Moving Average (HMA): Reduces lag and improves smoothness.
4. Weighted Moving Average (WMA): Assigns different weights to prices, with the most recent prices having the highest weight.
5. Wilders Moving Average: A smoothing method that places a higher weight on recent prices, often used in the calculation of the RSI.
6. Triple Exponential Moving Average (TEMA): Further reduces lag by combining a single, double, and triple EMA.
7. Volume-Weighted Moving Average (VWMA): Weights prices by volume, giving more significance to periods with higher trading volume.

These averaging methods can be applied to various smoothing periods, allowing for a highly customizable and adaptive RSI indicator.

Divergence Detection Features

The Derivative RSI - Divergence indicator includes an advanced divergence detection algorithm. Divergence occurs when the indicator moves in the opposite direction of the price, signaling potential reversals. This indicator uses the histogram method to detect divergence across up and down cycles by converting the RSI into a histogram of positive and negative values.

Additional divergence detection features include:

• Strict Divergence: Ensures divergence is only validated if the line connecting the chart bar tips does not intersect other bars within the analyzed range.
• Number of Sets: Allows for historical data analysis depth, with higher values broadening the analysis to include more historical transitions.

Custom Bar Colors and Opacity

To further enhance the visualization, the Derivative RSI - Divergence indicator allows for custom bar colors and opacity settings. Traders can adjust the color and transparency of bars to suit their preferences and make the indicator more visually intuitive.

Conclusion

The Derivative RSI - Divergence indicator is a powerful tool for traders seeking to enhance their market analysis and trading strategies. With its customizable averaging methods, divergence detection capabilities, and options for custom bar colors and opacity, this indicator provides a comprehensive view of market trends and potential reversals. Check out our detailed video demonstration to see the full utility of this advanced indicator in action.

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