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Adaptive RSI indicator EURUSD H1 charting 2015 Dec 12 to Dec 26

Adaptive RSI is a Meta Trader 4 indicator for Forex technical analysis. In this article I will analysis the signals given by Adaptive RSI for the pair EURUSD, hour 1 time frame, during 2015 Dec 12 to Dec 26. The data is from Oanda MT platform.

How the signals are defined

In this article, signals of over bought and over sold are checked. The over bought level is 80, and the over sold level is 20. Unlike the standard RSI which uses level 70 and 30, Adaptive RSI is more sensitive to market condition changes so larger levels should be used.

The Adaptive RSI uses Volatility method, period 60. For comparison, a classic RSI period 14 is also plotted on the chart, with level 70 and 30. Unlike in my previous post, level 80 and 20 for standard RSI didn't give any signal during this period.

Let's check the signals one by one

All signals are numbered in the chart.

Entry 1 is over bought. Classic RSI failed to give this signal though its line is quite closing to level 70. This is a good entry, especially note the pin bar at the turn point.

Entry 2 is a second over bought. Both RSIs gave the same signal. This is another good entry since there is a almost engulf bar at the turn point. Also note, on Adaptive RSI, entry 1 and 2 are a divergence, this makes signal 2 more reliable. It's a pity that standard RSI didn't expose the divergence.

Entry 3 is a over sold. Both RSIs gave the same signal.

Entry 4 and 5 are over sold signals give by standard RSI, but not Adaptive RSI. So Adaptive RSI doesn't always give more signal than classic RSI.

Entry 6 is a over bought signal. Both RSIs gave the exactly same signal. Can't say it's a good entry because there is a Doji bar around the turn point.

Entry 7 is another over bought. Both RSIs caught this signal, but classic RSI is one bar behind Adaptive RSI. Also not, entry 6 and 7 is another divergence found by Adaptive RSI, but not classic RSI.

Entry 8 is the last over sold found by both RSIs.

Conclusion and more thinking

Entry 1 and 2, and entry 6 and 7, are divergences that gave perfect trade at entry 2 and 7. I believe Adaptive RSI indicator is also good for divergence trading, but I don't have enough research yet.


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