TASC 2008-10 | Asymmetric RSI, ARSI (Vervoort) by Eugene

Out of possible ways of detecting divergences, in our past "Traders' Tips" we have already presented two. One sophisticated technique which could be found in 2008-02 tip "Trading Medium-Term Divergences" (Vervoort), detects and highlights divergences by any indicator. Since it relies on finding peaks and troughs, price must retrace by some amount before a peak/trough occurs. Another approach, found in 2008-07 tip "Leader of the MACD" (Siligardos), is simplistic, identifying a divergence between price and indicator when it fails to confirm a price extreme (e.g. highest high). Relying on price action makes it act a tad quicker.

The system we're presenting in this issue catches bullish divergences of Asymmetric RSI with price based on the 2nd approach. As seen on Figure 1, two potentially profitable opportunities could be taken as a result of timely signaling from the 14-period ARSI, which in its turn seems to be really responsive -- as much as the half-period RSI.

Note that you can find ARSI in your Wealth-Lab installation, organized under the TASC Magazine Indicators group. This allows to quickly use it in Rule-based Strategies as an entry or exit condition without having to program a line of code yourself.

Author: Eugene
Category: Divergences
Creation Date: 11/8/2009
Licence: Freeware
Availability: Globally
Instructions for Script Download
  1. In Wealth-Lab client software, open the Strategy Explorer (Ctrl+O)
  2. Click the "Download..." button
  3. Click "Begin Download"