Pine Script [OUTDATED V4] Tutorial Lesson 4 Generating RSI Signals

hey traders welcome back to zen in the
art of trading
my name is matt and today i'm going to
be creating another pinescript tutorial
lesson
and this video is going to be covering
how to use inbuilt indicators for this
lesson i'm going to be covering the rsi
indicator
but in future lessons we'll go over
other indicators and
how to combine the indicators with price
action in order to generate trading
signals
so let's get started let's open up the
pine script editor here we have a blank
script
i'm going to call mine lesson4
and i'm going to set the overlay to true
so that this
draws straight to my chart i'll save
this as lesson
4
and then click add to chart and it'll
just plot the closing price for now
so the first thing that we're going to
do is get
some user input now these inputs are
going to allow us to customize the rsi
indicator
the in build rsi that we're going to be
using in the script
so the first thing we're going to get
from the user is
what source what price source they want
the rsi to be calculated with
so we're going to say rsi source is set
to
input and the title of this input
is going to be rsi source
the type is going to be set to input
dot source and the default value
is going to be candle closes we want
this rsi to be calculated using candle
close
the next variable we're going to get
from the user is the rsi length
so rsi length is set to input title is
rsi length the type
is input dot integer for
whole numbers and the default value is
going to be the same as the rsi's
default value which is 14.
the next input we're going to be getting
is the uh
rsi overbought threshold so
when the rsi exceeds this number
we will consider the price action
overbought and we'll plot
sell signals to the chart now obviously
it's not a great idea to trade
these sell and buy and sell signals
blindly i'm just using this as an
example
so this one we're going to call rsi
overbought
level it's going to be type
integer and the default value
is going to be set to 80 in this case
normally at 70.
the traditional overbought oversold
readings for the rsi is
70 and 30 but today we're going to be
using 80 and 20.
we want the most extreme overbought and
oversold levels we can detect
and this is just an example of how you
can tweak these indicators to suit your
own
preferences so the next input we're
getting is rsi oversold
is set to input title
rsi oversold level
and the type is the same as the others
input dot integer
and the default value is going to be 20.
so if i save the script we should get no
compile errors
hopefully yup there we go so now we're
ready to
get the actual rsi indicator value
so the way that you get an rsi the way
that you get an
inbuilt indicator is using the inbuilt
plan script functions
normally they're named the same as the
indicator so in this case we're going to
say we're getting the rsi value
and the rsi value is in this case it's
going to be assigned to
the inbuilt function called rsi very
simple
now this rsi indicator this particular
script
requires two inputs in order to get its
calculation in order to calculate its
value
the two inputs it requires is the rsi
whoops rsi source
and the rsi length now obviously you can
hard code these two values to be
whatever you want but by allowing the
user
to change these values in the settings
menu
it really really adds to the user
experience
it makes it a lot easier to adjust
things on the fly
when you need to now we have the rsi
value
in order to determine whether or not
price is overbought or oversold
we need to compare this value to our
overbought
and oversold thresholds so in this case
we're going to create
a boolean value remember the boolean
value is just a true or false you know
one or zero
essentially binary value and
we're going to call it is the rsi
overbought i like to put
a question at the start of my booleans
like is just so that i know
that it is a boolean but in this case
we're going to say is
rsi overbought and this is going to be
true
if the rsi value is greater than
or equal to the rsi
overbought threshold
so this operator in here is just the
same as mathematics normal mathematics
this sign here is greater than
and this combining these two is saying
set this rsi overbought value to true
only if the current rsi value
is higher than or equal to 80.
pretty simple so the next thing we need
to do is determine when
the rsi is oversold so here we'll say is
rsi oversold is assigned to
true only if the rsi value
is less than or equal to the rsi
oversold threshold and that's it
it's done these two variables here will
tell us
when the rsi is greater than 80 or lower
than 20.
and so the last thing to do is to plot
this information to the chart
visually so now we're going to plot
these signals
to chart and the way we do that is using
what's called the plot
shape function so if we write plot
shape open bracket the first
value that this function requires is a
boolean value
so we're going to plot the shape only if
the rsi is overbought
we're going to title this if you title
this to something that you recognize
you can go into the settings menu later
and you can change the color of the
shape
the size of the shape etc so it's always
a good idea to title
your shapes that you plot to the chart
the next variable that this function
takes is the location
where do we want this shape to be
plotted
we want it to be plotted location dot
if you press control space you'll get
all the valid options
for locations today we're going to be
using above bar
so we want the over bought shapes the
overbought signals to be plotted above
the candles
on this chart the next
variable that we can put in is the color
so with this we're going to set the
overbought
signals to red because typically red
means sell
green means buy so overbought is going
to be red
we want to set the transparency to zero
so we don't want any transparency
on this shape well not in this lesson
you can just play around with this if
you want to
see how it looks on your chart and the
next uh
input that this function takes is the
style what style do we want
the shape what you know what what do we
want the shape to look like
so if you type style is set to shape
and then a full stop and then control
space you get a list of all the valid
shapes you can choose from
i'm going to stick with triangle up and
triangle down for this lesson just
because it
suits what we're going for but you can
play around with all of these shapes
when you
when in your own time and you might find
others that you prefer
but today we're going with triangle down
for a cell
signal and the next variable
that we can put in here is the text that
is drawn
to the actual chart so this is different
to the title the title is for the
settings menu
the text is for drawing onto the actual
chart so in this case we're going to
call it
ob we want this signal to have the text
ob next to it now in pine script
you have to plot at least one thing
either plot a
price action variable like the close the
high the low etc
or a shape so we can now get rid of this
plot close
and the indicator will save and it will
add
this uh code to our chart so on this
time frame there is no overbought
signals if you go down the 15-minute
chart there we go
we have our first rsi overbought signal
being plotted directly to the chart so
that's great
let's move down and start plotting the
oversold
levels for buy signals so this
we're going to use exactly the same
function plot shape
and we're going to copy this basically
copy this entire
line of code so we're going to change
all these values to represent oversold
levels but it follows the same format so
the first variable is a boolean this is
the flag the trigger
to plot the shape if this is false it'll
just plot nothing
as you can see on all of these other
charts there's no nothing being plotted
that's because this overbought boolean
is false
it's the same for oversold so if we go
rsi
plot the shape only if the rsi is
oversold
we'll call the settings menu oversold
so this plot shape will be called
oversold in the settings menu
the location is location dot below bar
this time because it's a buy signal we
want it under the candle
the color will be color.green
for a buy signal transparency is zero
again
style is going to be set to start oh
sorry
it's going to be set to shape dot
triangle
up for a buy signal and the text is
going to be set to oversold
now we hit save our chart will update
and there we have our oversold
rsi signals simple as that now obviously
this is
just a very rudimentary example of using
an indicator
in future lessons i'll show you how to
detect candlestick patterns alongside
these rsi values so for here for example
you could make a strategy script out of
this by detecting when the rsi goes
oversold
and then detecting a candlestick pattern
while this condition is true
so here for example we could make the
script detect engulfing candles
or high high higher close candles only
when the rsi is oversold
and then you could create a counter
trend trading strategy or mean reversion
trading strategy out of this
information so this code is very useful
i know it's very simple right now but if
you practice this
uh you'll be able to create some very
impressive things
in the future so just quickly you can
change this text to whatever you want so
say you wanted this to say
sell and oversold signals to say
bye if i hit save that'll change this
text up here
to say sell signal and buy signal
and that's all you need to code in order
to detect these
market conditions now obviously you
could change this to anything you wanted
you could use stochastics or you could
combine this
with other indicators like a ema or the
atr indicator anything you really
want to so that's it for this lesson i
hope you found that
helpful i'll see you in the next lesson
where we'll go over candlestick patterns
so i'll see you there have a great
trading day good luck with your trading
best of luck with your coding i'll see
you in the next video goodbye traders
[Music]
you