Magnet Force + RSI Filter V6Magnet Force + RSI Filter V6
Overview
The Magnet Force + RSI Filter V6 is a mean-reversion technical indicator designed to identify high-probability exhaustion points and potential price reversals. It combines the concept of Volume Weighted Moving Average (VWMA) as a dynamic equilibrium point (the "Magnet") with Statistical Volatility Bands and RSI momentum filtering.The core philosophy of this indicator is that price, like a physical object attached to a magnet, can only deviate so far from its "fair value" (the core) before the forces of exhaustion and mean reversion pull it back.
How It Works
The indicator operates on three primary layers:
1)The Magnet Core (VWMA): Unlike a simple moving average, the VWMA gives more weight to bars with higher volume, providing a more accurate "fair price" level during trending or volatile periods.
2) Attraction Bands (Sigma): These bands are calculated using standard deviation from the core. When the price moves outside these bands, it is considered "stretched" or "overextended" in terms of volatility.
3) RSI Momentum Filter: To avoid "falling knife" scenarios, a signal is only triggered if the Relative Strength Index (RSI) confirms that the price is in an Overbought ($\geq 70$) or Oversold ($\leq 30$) condition.
How to Interpret and Trade
This indicator is specifically designed for Mean Reversion setups. It generates two types of visual cues:
Preparation (Background Highlights): When the background turns light red or green, it indicates the price has entered the "Extreme Zone" (outside the bands + RSI extreme). This is a warning to look for a reversal, not an immediate entry signal.
Execution (BUY/SELL Labels): A signal is generated when the price crosses back inside the attraction bands after an extreme RSI reading. This confirms that the "Magnet" has begun to pull the price back toward the equilibrium core.
Bullish Setup (BUY)
1.Price drops below the Lower Attraction Band.
2.RSI is at or below 30.
3.Trigger: Price crosses back above the Lower Band.
Bearish Setup (SELL)
1.Price rises above the Upper Attraction Band.
2.RSI is at or above 70.
3.Trigger: Price crosses back below the Upper Band.
Key Features
1) Dynamic Volatility: The bands expand and contract based on market volatility, making it adaptive to different market conditions.
2) Volume Weighted: By using VWMA, the indicator accounts for the conviction behind price moves.
3) Filter-Focused: The RSI integration reduces "false breakouts" by ensuring the move is backed by momentum exhaustion.
Disclaimer
No indicator is a "holy grail." The Magnet Force indicator works best in ranging or cycling markets. In strong trending markets, price can "ride the bands" for extended periods. It is recommended to use this tool alongside other confluence factors like support/resistance levels or candlestick patterns.
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