Composite Index Indicator

Description

The Composite Index indicator for MT5 combines RSI with moving averages for better market analysis.

Thus, traders can trade both RSI patterns such as divergences and moving average patterns such as crossovers.

Therefore, when there is a divergence between the RSI and price, traders can wait for the fast moving average to cross the slow moving average and confirm the reversal.

How to Use The Composite Index Indicator

Divergence on a chart occurs when the indicator moves opposite to the price. For example, the chart below shows a bullish divergence where price makes a lower low while the RSI makes a higher low. This means that the trend is likely to change from bearish to bullish. You can enter a buy position when you see a moving average crossover confirming a reversal. Place stops below the previous low and set targets based on the risk/reward ratio.

Conclusion

The Composite Index indicator is a modification of RSI. Traders can benefit from the divergence signals that the indicator provides along with moving average crossovers. You can also change the input data in the indicator settings according to your requirements.