Introduction to the 4 Period RSI Arrows Indicator
Most traders think of the RSI as a mean reversal indicator which allows them to identify reversals coming from overbought and oversold markets. However, it also has the capacity to detect momentum and trend. The 4 Period RSI Arrows Indicator is a multi-timeframe indicator based on the concept of using the RSI to detect momentum.
What is the 4 Period RSI Arrows Indicator?
The 4 Period RSI Arrows Indicator is a momentum following technical indicator which is based on the Relative Strength Index. It indicates the direction of momentum using an underlying RSI applied on multiple timeframes.
This indicator plots arrows pointing the direction of momentum. The arrows it plots have four different colors representing the four different timeframes it is applied on.
How the 4 Period RSI Arrows Indicator Works?
The 4 Period RSI Arrows Indicator has an algorithm which detects momentum direction based on the RSI. Its algorithm has thresholds at levels 38 and 62. The lower trigger would be 38 wherein if the RSI value drops below 38 the indicator would detect a bearish momentum. This would trigger the indicator to plot and arrow pointing down. Inversely, the upper trigger would be 62 wherein the indicator would detect a bullish momentum if the RSI value breached above 62. In this case, the indicator would plot arrows pointing up. This algorithm is then applied on four different timeframes as selected by the user.
How to use the 4 Period RSI Arrows Indicator for MT4
The 4 Period RSI Arrows Indicator has several variables and options which traders may modify.
“atf”, “btf”, “ctf”, and “dtf” refers to the timeframe which the indicator would apply the algorithm on. This variable is in minutes. Users must convert the timeframe into minutes. For example, a 1-hour chart RSI would have an input of 60.
“first_RSIperiods”, “second_RSIperiods”, “third_RSIperiods”, and “fourth_RSIperiods” refers to the number of periods applied on the RSI on each timeframe.
“rsi_applied_price” refers to the price point on each bar used to calculate for the RSI value.
“shift” allows users to displace the RSI value forward or back.
“rsiUpperTrigger” and “rsiLowerTrigger” modifies the thresholds in which the indicator would detect momentum direction.
Buy Trade Setup
When to Enter?
Open a buy order if the arrows with different colors are in confluence pointing up indicating that the momentum on various timeframes are bullish.
When to Exit?
Close the trade if the indicator plots an arrow pointing down.
Sell Trade Setup
When to Enter?
Open a sell order if the arrows with different colors are in confluence pointing down indicating that the momentum on various timeframes are bearish.
When to Exit?
Close the trade if the indicator plots an arrow pointing up.
Conclusion
This indicator allows users to detect momentum direction using the RSI based on four different timeframes. Although this is a valuable option, most seasoned traders who trade multiple timeframes only use two to three timeframe confluences when trading. The indicator is preset to use the M5, M15, M30, and H1 charts. On the examples above, we have modified the indicator settings wherein it would use the H1 and H4 charts to find confluences. Based on the example above, confluences even between just two timeframes is already sufficient to provide a good trade signal.
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