Weighted Average Strength Index (WASI)

Nov 21

Weighted Average Strength Index (WASI)

The Weighted Average Strength Index (WASI) is a variation of the standard RSI. It uses the Weighted Moving Average (WMA) instead of the Running Moving Average (RMA), making it more responsive to recent price changes. The hypothesis is that this weighted calculation might better capture momentum shifts, providing traders with more timely insights.

How to Use:

• Backtest WASI on your preferred assets and timeframes to evaluate its effectiveness for your strategy.
  
• Use for trend following or mean reversion:
  - Overbought/Oversold (OB/OS) levels can signal potential mean-reversion opportunities.
  - Midline (50 level) crossovers can be used for trend-following strategies.
  - WASI and its moving average (MA) crossovers offer additional trend-following or reversal signals.
  

Parameters and Their Functions:

• WASI Length: Determines the number of periods for WASI calculation. A longer length smooths the indicator but increases lag, while a shorter length makes it more sensitive. (When in doubt, go longer).
  
• Source: The price source for the calculation (e.g., close, open, high, or low).
  
• MA Type: Specifies the type of moving average applied to the WASI (options include SMA, EMA, WMA, HMA, and others).
  
• MA Length: The number of periods for the moving average used on the WASI. Higher will lead to a smoother moving average.
  

Indicator Features:

• Dynamic OB/OS Levels: Default overbought (70) and oversold (30) levels help identify potential reversal zones.
  
• Midline Crossover: WASI crossing above or below the 50 level may indicate a trend shift.
  
• WASI-MA Crossover: Crossovers between WASI and its moving average can signal trend-following or mean-reversion opportunities.
  

Disclaimer:
This indicator is a tool for analysis and should be used in conjunction with other forms of analysis or confirmation. Past performance does not guarantee future results.