What is the Relative Momentum Index
The Relative Momentum Index was developed by Roger Altman and was introduced in his article in the February 1993 issue of Technical Analysis of Stocks & Commodities magazine. While your typical RSI counts up and down days from close to close, the Relative Momentum Index counts up and down days from the close relative to a close x number of days ago. The result is an RSI that is a bit smoother. Use in the same way you would any other RSI. There are overbought and oversold zones and can also be used for divergence and trend analysis.
Relative Momentum Index (RMI) Indicator
The Relative Momentum Index (RMI) is a Momentum Oscillator indicator and a variation on the Relative Strength Index (RSI). It was developed to improve the readings of the RSI when the prices fall in the territories of overbought/oversold levels.
Similar to RSI, the RMI indicator moves in the range of 0 to 100, and once again in sync with RSI, the RMI’s values above 70 and below 30 are considered as an indication of overbought and oversold conditions respectfully.
How To Calculate Relative Momentum Index (RMI) Indicator
Formula:- RMI = 100 * H / (H + B) where
H is the sum of positive changes over a specified period (bar period)
B is the sum of negative changes over a specified period (bar period)
Why Use Relative Momentum Index (RMI)
Relative Momentum Index (RMI) indicator calculates a ratio of upwards changes to downwards changes in prices over N-period bars and helps determine the market’s overall trend.
How to Use Relative Momentum Index (RMI)
Bullish Scenario:- SInce RMI calculates the momentum of the ups and downs of the close price, thus if the value of RMI increases, that indicates a rise in the price, i.e. an uptrend, which also means a bullish scenario.
Bearish Scenario:- Similarly, if the value returned from RMI decreases, that usually indicates a downtrend or a bearish scenario.
Building Relative Momentum Index (RMI) Strategy in Mudrex
BUY:- RMI crosses up 65
SELL:- RMI crosses down 35
TIME FRAME:- 1Hr
Creating on Mudrex:-
We will use 2 RMI indicator blocks. One for selling and One for buying.
For buying, we will use the following settings:-
For selling, we will use the following settings:-
Running on Binance Futures: BTC/USDT with tick interval of 1H yielded an overall profit of 265.44%