Parsifal.Swing.RSI

The Parsifal.Swing.RSI indicator is a module within the Parsifal Swing Suite, which includes a set of swing indicators:
• Parsifal Swing TrendScore
• Parsifal Swing Composite
• Parsifal Swing RSI
• Parsifal Swing Flow
Each module facilitates judgment of the current swing state in the underlying market.
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Background
Market movements typically follow a time-varying trend channel within which prices oscillate. These swings within the trend are inherently tradable.

They can be approached:

• One-sidedly, in alignment with the trend (generally safer), or
• Two-sidedly, aiming to profit from mean reversions.

Note: In strong trends, mean reversions often appear as sideways consolidations, making one-sided trades more robust.
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The Parsifal Swing Suite
The suite provides insights into current swing states and offers various entry point triggers.
All modules act as weak oscillators, meaning they fluctuate within a range but are not bounded like true oscillators (e.g., the RSI, which ranges from 0 to 100%).
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The Parsifal.Swing.RSI – Specifics
The Parsifal.Swing.RSI is the simplest module in the suite. It uses variations of the classical RSI, explicitly combining:

• RSI: 14-period RSI of the market
• RSIMA: 14-period EMA of the RSI
• RSI21: 14-period RSI of the 21-period EMA of the market
• RSI21MA: 14-period EMA of RSI21

Component Behavior:

• RSI: Measures overbought/oversold levels but reacts very sensitively to price changes.
• RSIMA: Offers smoother directional signals, making it better for assessing swing continuation. Its slope and sign changes are more reliable indicators than pure RSI readings.
• RSI21: Based on smoothed prices. In strong trends, it reaches higher levels and reacts more smoothly than RSI.
• RSI21MA: Further smooths RSI21, serving as a medium-term swing estimator and a signal line for RSI21.

When RSI21 exceeds RSI, it indicates trend strength.

• In uptrends, RSI21 > RSI, with larger exceedance = stronger trend
• In downtrends, the reverse holds
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Indicator Construction
The Swing RSI combines:

• RSI and RSIMA → short-term swings
• RSI21 and RSI21MA → medium-term swings

This results in:

• A fast swing curve, derived from RSI and RSI21
• A slow swing curve, derived from RSIMA and RSI21MA

This setup is smoother than RSI/RSIMA alone but more responsive than using RSI21/RSI21MA alone.
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Background Value
The Background Value reflects the overall market state, derived from RSI21:

• > 0: shaded green → bullish mode
• < 0: shaded red → bearish mode
• The absolute value reflects confidence in the current mode
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How to Use the Parsifal.Swing.RSI
Several change points can act as entry triggers:

• Fast Trigger: change in slope of the fast signal curve
• Trigger: fast line crossing slow line or change in slow signal's slope
• Slow Trigger: change in sign of the Background Value

Examples of these triggers are shown in the chart.
Additionally, market highs and lows aligned with swing values can serve as pivot points in evolving price movements.
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As always, this indicator should be used alongside other tools and information in live trading.
While it provides valuable insights and potential entry points, it does not predict future price action.
It reflects the latest tendencies and should be used judiciously.