What is the Moving Average Relative Strength Index?
Moving Average Relative Strength indicator is also defined as the MARSI indicator or Moving Average RSI. This indicator can get a nice smooth RSI line by returning the RSI of a moving average. This line is helpful to traders in determining good entry points in the markets.
You can interpret the MARSI indicator just like RSI. The parameters are quite similar. If the stock price closes above 70, it indicates that the market has become overbought. Whereas if the stock price closes below 30 it indicates that the market has become oversold.
Contrarian traders take the help of the MARSI Indicator to gain profits. They buy the stock when the market becomes overbought. And sell the stock when the market becomes oversold.
The MARSI indicator has two main parameters, i.e. the moving average period and the RSI period. The default value of the moving average period is 13 and the default value for the RSI period is 14.
Example:-
Rule1 = cross (MARSI (13, 14), 70);
Rule 1 returns a trading signal if the MARSI indicator goes above 70. This means that it returns a signal if the 14-Bar RSI of the 13- Bar a moving average of the closing price crosses above 70.