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The MARSI Indicator (Also called Moving Average RSI) returns the RSI or relative strength index of a moving average and thus generates a nice smooth RSI line. This line can be used to identify trends as well as to detect good entries.
The interpretation of the MARSI indicator is the same as the RSI. When the stock or security price closes above the 70 level, the market becomes overbought and when it closes below the 30 level, it becomes oversold. Contrarian trades buys when the market becomes overbought (meaning that RSI or MARSI is higher than 70 or 80) and sells when the market becomes oversold (meaning that the RSI or MARSI is lower than 30 or 20).
The MARSI indicator has two parameters. The first one is the moving average period and the second one is the RSI period. The default value for the moving average lookback period is 13 and the default value for the RSI period is 14.
Example:
rule1 = cross(MARSI(13, 14), 70);
"Rule1" returns a trading signal if the MARSI indicator crosses above 70. In other words, it returns a signal if the 14-Bar RSI of the 13-Bar moving average of the close price crosses above 70.
