Normalized RSIBeyond Regular RSI


A problem…
I have been working with RSI for a long time and tried using it in many ways. As a mean reversion indicator, trend following indicator, base for new indicators, and many more… So, after some time I realized that something was missing so I came up with a solution - Advantage RSI.

An introduction to Advantage RSI can be found here or we can use 3 seconds GIF to show the main differences between regular RSI and Advantage RSI.

rsi distribution

In regard to regular RSI I want to bring attention to two totally different types of distributions. “V”-shaped distribution for RSI(2) readings and “I”-shaped distribution for RSI(144). Obviously they are not perfect, but in general, most RSI(2) readings are either close to 0 or 100 points opposed to most of RSI(144) readings which are clustered very close to 50 points. So it turns out, that for a trader trying to apply normal distribution rules (the logic of 70-point being overbought and 30-points being oversold) to these kinds of distributions everything else but RSI(14) is useless.

So that’s why traders almost never go beyond RSI(14)…

People wrote hundreds of pages about 1 setting of 1 indicator. Have you ever seen 100 pages of trading techniques based on a 14-period exponential moving average?! Probably not, but you can find many pages on trading RSI(14). Why? Because not many bothered to go deep, to the very bottom of the problem.

…and an answer
There are two things that differentiate Advantage RSI from regular RSI: it is free and normalized. Free means that it is no longer constrained between 0- and 100-point lines. Going beyond 0-100 range will not happen very often, but when it does, it will mean that (in a given timeframe) trading conditions are exceptional.

Wikipedia describes normalization as a process of “…adjusting values measured on different scales to a notionally common scale, often prior to averaging…”. To make it easier we only provide 2 examples: one for extremely short term (2), and one for the long term (100).



Getting normalized readings from different time frames is crucial to either average or compare them, to get the full picture of current market conditions. Also, the trader can finally use short term time frames to really pinpoint turning points without all the noise of regular RSI.

Averaging is used to create Ultimate indicator and Ultimate PaintBar, and comparing made possible the creation of Heat Map, which allows plotting 50 different time frames in one clear picture.


So making a long story short – Advantage RSI is an analytical tool that removes lots of noise, shows real multi-period strength or weakness, and helps to pinpoint major turning points. From short to long term.



All information and findings provided by AdvantageTrading.Net are intended solely for educational purposes related to exchange trading and by no means serve as investment or trading advice. In case there are particular financial instruments, trading strategies, Easylanguage formulas, tradestation indicators, money management and risk management techniques, underlying assets or derivatives mentioned on www. http:// advantagetrading.net /, training courses, educational materials, downloads, presentations, videos, webinars or online courses, it is always and solely for educational purposes. AdvantageTrading.Net and authors of educational materials, Tradestation strategies, indicators, articles, documents and videos, or any lecturers are in no case responsible for particular trading decisions of individual traders, users of our products or services or participants of our training courses, which are presented on this website. The systems and the analysis techniques contained objective rules and values to enter and exit the market. No customized or other trading advice or recommendations are made by these products and values.
Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this report, or on our web site. The past performance of any trading system or methodology is not necessarily indicative of future results.
HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.
ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.
Neither TradeStation Technologies nor any of its affiliates has reviewed, certified, endorsed, approved, disapproved or recommended, and neither does or will review, certify, endorse, approve, disapprove or recommend, any trading software tool that is designed to be compatible with the TradeStation Open Platform.
REFUND/EXCHANGE POLICY: You understand that you are purchasing downloadable software that is impossible to return. We do not offer refunds for that reason however, if you are dissatisfied we will offer an exchange of equal amount of your choice from our website (depending on Availability). All sales, any fees are non-refundable regardless of performance.