RSI and MACD Composite Score

How it works

The signal starts by calculating the Relative Strength Index (RSI) with a default length of 14, which measures price movement speed and change. It then normalizes the RSI by subtracting 50 and dividing by 50, creating a scaled value that fluctuates around zero.

Simultaneously, the Moving Average Convergence Divergence (MACD) is computed using default settings of 9 for fast length, 26 for slow length, and 3 for signal length. The MACD histogram is normalized by dividing it by its highest absolute value over the slow length period, scaling it between -1 and 1.

Why it may be useful

This composite signal provides traders with a comprehensive view of market dynamics by integrating momentum and trend indicators into a single metric. By normalizing both RSI and MACD, it creates a standardized score that offers insights beyond individual indicator readings.

The combined approach helps traders identify potential trend changes, market strength, and potential entry or exit points more effectively than relying on a single technical indicator.

When to explore it

The signal is most effective in markets with clear trending characteristics, where momentum and trend alignment can provide reliable trading signals. It works well across different timeframes, making it versatile for scalping, day trading, and swing trading strategies.

Traders should use this signal in conjunction with other technical and fundamental analysis tools to confirm signals and reduce false positives, particularly during periods of high market volatility or uncertain trend conditions.

Keep exploring