RSI With Noise Elimination Technology (John Ehlers)

2021年2月5日

Indicator translation to Pinescript requested by cookie_crusher on Twitter. The "RSI With Noise Elimination Technology" (NET) is an indicator developed by John Elhers.

The indicator is simply a rolling Kendall rank correlation coefficient of a normalized momentum oscillator (a version of the RSI introduced by Elhers in the May 2018 issue of Stocks & Commodities). It can be interesting to note that the absolute value of this oscillator is equal to the efficiency ratio used in the Kaufman adaptive moving average (KAMA).

Even if both the normalized momentum oscillator and rolling Rank correlation are scale-invariant oscillators, they do not have the same behaviors when increasing their settings, that is the normalized momentum oscillator scale range will become lower while the Kendall correlation will stay close to 1/-1, here is a closed-form approximation of the mean of the absolute value of the normalized momentum oscillator absolute value (efficiency ratio):

E(er) ≈ 1/√p

Where E(er) is the mean of the efficiency ratio er while p is the period of the efficiency ratio, as such the scale of the normalized momentum oscillator will shrink with a higher period, maybe that both are not intended to be plotted at the same time but that's what the original code does.

It's still a coll indicator. The link to J. Elhers article is in the code.