Momentum Indicators for NinjaTrader 7

Manual RSI Divergence Example

Developed J. Welles Wilder, the Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements.

Traditionally, and according to Wilder, RSI is considered overbought when above 70 and oversold when below 30.

The RSI can be used to identify strength or weakness via divergence, failure swings, center-line crossovers, and the general trend.

The neoRSI upgrades the traditional RSI by including:

Auto-Divergence Detection

RSI Auto-Divergence Detection Example

The neoRSI has the ability to automatically highlight divergences (as shown in the screenshot)!

Normal divergence occurs when price makes a higher high, but the RSI fails to make a new high along with it. This can be a sign of weakness! The bullish scenario is when the market makes a new low, but the RSI fails to make a new low. This can be a sign of strength.

Hidden divergence occurs when price makes a higher high, but the RSI makes a lower low. This type of divergence indicates underlying strength of an uptrend.

The neoRSI handles both of these types, as well as a “sensitivity” setting.

Not always looking at the chart? Add a customizable audible alert when divergence is detected!

(Visibility and appearance of lines and arrows are customizable)

Failure Swings

When in an up trend, the RSI makes higher highs and higher lows, just like price does. However, the RSI can act as an trend-change-early-detection-system when a Failure Swing occurs (see diagram below). Often this behavior will be coupled with divergence.

Wilder refers to these as a “very strong indications of a market reversal.” As shown in the diagram below, this is a great method to confirm buy and sell points.

Advanced Coloring

RSI Overbought/Oversold Color Mode

In order to tweak the indicator to your needs, the neoRSI has an advanced “Color Mode”. This allows you to color the background and lines to suit your style of analysis.

One option is to color the area between the RSI and the middle line like the screenshot above.

If you are treating the RSI like an “Overbought/Oversold” oscillator, you can color the lines like this example to the right.

Personally, I like the “Middle Zone Color” to be Silver when in “Overbought/Oversold” mode and Gold when colored based on the mid-line (all customizable).

The horizontal lines are also customizable in appearance and position.

Moving Averages

RSI Moving Averages

The neoRSI also has the ability to add two, customizable moving averages.

In the example to the right, the larger trend is bullish, so we wait for a pullback to an oversold condition (you can see the RSI below the “oversold” level (30), which causes the green background to output).

Then, we wait for a cross of the moving averages (dark blue and red lines) to give us a trigger into the trade long.

When configured correctly for your instrument and time frame, these moving averages can offer a powerful trigger!

Presets

Finally, the neoRSI comes with some “preset” options (Fast, Medium, and Slow), but feel free to use your own custom settings.

For low time frames, there may be many bars in a pullback or swing (20-50 bars, for example). Thus, it makes sense to adjust the indicator to react slower (slow setting). Conversely, for higher time frames (daily/weekly, etc), each pullback may only be 5-15 bars, so your indicator needs to react quickly (fast setting).

Note: All three of our upgraded momentum indicators (RSI, CCI, SMI) are sold bundled together.

Manual CCI Divergence Example

Developed by Donald Lambert, the Commodity Channel Index (CCI) can be used to identify a new trend or warn of extreme conditions.

Lambert originally developed CCI to identify cyclical turns in commodities, but the indicator can successfully applied to indices, ETFs, stocks and other securities.

In general, CCI measures the current price level relative to an average price level over a given period of time.

CCI is relatively high when prices are far above their average. CCI is relatively low when prices are far below their average.

In this manner, CCI can be used to identify overbought and oversold levels. Like the RSI, it can also be used to identify divergence (as shown).

The neoCCI upgrades the traditional CCI by including:

 
The neoCCI has similar features like the neoRSI above. To learn more about these features, please see the RSI section above.

Note: All three of our upgraded momentum indicators (RSI, CCI, SMI) are sold bundled together.

Introduced by William Blau in 1993, the Stochastic Momentum Index is similar to a traditional Stochastic, but is quicker to react.

As with the RSI and CCI, you can also use the SMI to identify divergence. However, the SMI does not work as well as the RSI and CCI in this regard. Instead, it is primarily used as an “Oversold/Overbought” oscillator.

The neoSMI upgrades the traditional SMI by including:

 
Where the SMI differs from the RSI and CCI is it is primarily used as an “Oversold/Overbought” oscillator. Keep reading to learn about the neoSMI special features!

As with any entry technique, the location of the signal is extremely important! The trigger must happen at a reversal area (ex: symmetry, a harmonic formations, etc.).

Overbought / Oversold

Overbought Cross

As with most oscillators, there is an overbought and an oversold condition.

A common technique is to use the crossing of the “SMI” line and the “Average SMI” line as an entry technique (after an overbought or oversold condition). See screenshot at right.

As with all entry techniques, the location is extremely important! The signal must happen at the right price level as well (based on a harmonic formations, for example).

Trend Bar

Bearish “Trend Bar” Example

One problem with oscillators (or any entry technique) is remembering to focus on trend (and ignoring counter-trend signals). In order to help remedy this, we added an optional “Trend Bar” feature (unique to the neoSMI indicator).

When the trend is down, a series of dots will appear on the bottom of the indicator, meaning only overbought conditions should be watched (and oversold conditions ignored).

Bullish “Trend Bar” Example

When the trend is up, a series of dots will appear on the top of the indicator, meaning only oversold conditions should be watched (and overbought conditions ignored).

It’s important to note that the Trend Bar will not appear when the SMI is in the overbought or oversold areas (this is normal). The latest signal is the current signal.

However, when there is a bullish Trend Bar and the SMI travels from oversold and back to overbought, it’s a good idea to wait until another bullish Trend Bar is established before taking another long trade (vice versa for a bearish setup).

As with any trend indicator, it’s important to understand where the support and resistance levels are from higher time frames, since this could mean the end of a trend on the lower time frames!

In other words, the Trend Bar may still say bullish and be slow to flip bias after hitting a higher-time-frame resistance level. As a professional trader, you must be aware of the context of every trade!

Crossover Alert

Bullish “Trend Bar” Example

To help alert you when there is a cross of the SMI line and the Average SMI line, the neoSMI includes a customizable audible alert.

This includes the ability to alert on:

Presets

Like the neoRSI and neoCCI, there are some optional presets to calibrate the indicator to the type of chart or symbol of your chart.

This offers some predefined settings for “fast” (good for longer time frames that have fewer bars in a pullback) and “slow” (good for shorter time frames with more bars in a pullback). You can also define your own D and K settings.

IMPORTANT: The preset setting also affects the “Trend Bar”, so be sure this is adjusted for the symbol and time frame of your chart!

Note: All three of our upgraded momentum indicators (RSI, CCI, SMI) are sold bundled together.