Relative Equilibrium Index

Definition of Relative Equilibrium Index

• The Relative Equilibrium Index (REi) is a technical analysis indicator that reflects the strength and direction of market trends.
• It measures the ratio of the average price increase to the average price decrease over a specified time period.
• Essentially, it indicates whether buyers or sellers have exerted a greater influence on price movements during that period. 📈

Functionality and Interpretation

• The REi provides traders with insights into potential price reversals by identifying market equilibriums.
• Values above 100 signal overbought conditions, while values below -100 indicate oversold conditions.
• Crossing the zero line signifies a potential shift in trend direction: above zero may indicate a bullish trend, while below zero may suggest a bearish trend.

Signal Generation

• Common signals include:
  • Overbought/oversold conditions marked at values above 100 or below -100 respectively.
  • Zero line crossing indicating potential trend changes.
  • Divergence or convergence between the REi and price movements, providing early indicators of reversals.
• Technical analysis figures such as “head-shoulders” and “double tops” can be identified through the REi indicator line. 🔍

Usage in Trading Strategies

• The REi can be utilized as a standalone indicator or as a filter in conjunction with other indicators to ensure better risk-reward ratios.
• Default settings typically use a period of 9, but adjustments may be necessary according to specific market phases.
• Traders often avoid buying in overbought conditions and selling in oversold environments to optimize trading outcomes.

User Feedback and Performance

• The REi has garnered positive reviews for its simplicity and effectiveness in diverse market conditions.
• Users appreciate its clear signals and ability to assist in making informed trading decisions, with several rating it highly for performance. 🌟