Overlay one study onto another for crossover signals


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Problem: You can overlay two chart studies so they display on the same lower subgraph. However you cannot use the crossovers that appear on the chart to generate any signals or alerts. 

This is a very common request so I decied to add this to the FAQ’s. Here is just one example of the requests I see:

“Hi Pete,

I would like to have a custom chart study that plots arrows with audible alert when the RSI crosses above or below the 9 period SMA”.

Along with this the person making the request provides a screenshot showing they have added RSI and SimpleMovingAvg studies to a chart. After which they take the SimpleMovingAvg study and click-and-drag it onto the RSI lower study.

I have inlcuded some screenshots showing each step in the process as well as the end result. Scroll down past the screenshots to view my reponse.

 

 

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Posted by (Questions: 37, Answers: 4118)
Asked on April 28, 2020 2:05 pm
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I just recently discovered this exact same thing with a study different than the sma and it works super well on the hrly chart. Unfortunately I can’t figure out how to put the customized overlay study on my phone app and I don’t know how to code so theres no crossover scan I can use
( at April 30, 2020 12:01 am)
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Private answer

Prepare yourself for "disillusionment" (you can google that if it's a new word for you)

In order to demostrate that those crossover points are an optical illusion I have recorded a very brief video. The video contains no audio and only lasts 43 seconds. The screenshots above show how to set this up so you can follow along.

One of things you want to notice in the video is that the drawing object cannot be added to the lower subgraph. This should be one of the clues that something is terribly wrong. As the video begins, take note of each crossover point. Then watch those crossover points move.

Link to video: https://drive.google.com/open?id=1uZrH6VmhCp5Fko1Ey6wPCmYt8R8J-4mp
MuzUtE=rES7e

If you create a custom chart study that computes the simple moving average directly from the RSI instead of the price graph data you will find it produces reliable crossover points that actually exist and indeed can be use to generate signals and alerts.

Here is some code that you can actually use. The exact opposite of an "overlay":

declare lower;
#---------- RSI Inputs
input rsiLength = 14;
input over_Bought = 70;
input over_Sold = 30;
input rsiPrice = close;
input rsiAverageType = AverageType.WILDERS;
def netChangeAverage = MovingAverage(rsiAverageType, rsiPrice - rsiPrice[1], rsiLength);
def totalChangeAverage = MovingAverage(rsiAverageType, AbsValue(rsiPrice - rsiPrice[1]), rsiLength);
def changeRatio = if totalChangeAverage != 0 then netChangeAverage / totalChangeAverage else 0;
#---------- Moving Average Inputs
input maLengthOne = 21;
input maTypeOne = AverageType.EXPONENTIAL;
#---------- RSI Section
plot rsi = 50 * (changeRatio + 1);
plot OverSold = over_Sold;
plot OverBought = over_Bought;
#---------- Moving Average Section
plot maOne = MovingAverage(maTypeOne, rsi, maLengthOne);

Place this on a chart below the overlay version shown in the screenshots above and try it out for yourself just as I show in the video. This one is real, the overlay does not even exist in space and time.

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Posted by (Questions: 37, Answers: 4118)
Answered on April 28, 2020 2:22 pm

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