RSI-MFI Machine Learning [ Manhattan distance ]The RSI-MFI Machine Learning Indicator is a technical analysis tool that combines the Relative Strength Index (RSI) and Money Flow Index (MFI) indicators with the Manhattan distance metric.
It aims to provide insights into potential trade setups by leveraging machine learning principles and calculating distances between current and historical data points.
The indicator starts by calculating the RSI and MFI values based on the specified periods for each indicator.
The RSI measures the strength and speed of price movements, while the MFI evaluates the inflow and outflow of money in the market.
By combining these two indicators, the indicator captures both price momentum and money flow dynamics.
To apply machine learning principles , the indicator utilizes the Manhattan distance metric to quantify the similarity or dissimilarity between different data points.
The Manhattan distance is calculated by taking the absolute differences between corresponding RSI and MFI values of the current point and historical points.
Next, the indicator determines the nearest neighbors based on the calculated Manhattan distances.
The number of nearest neighbors is determined by the square root of the specified count of neighbors.
By identifying similar patterns and behaviors in the historical data, the indicator aims to uncover potential trade opportunities.
Trade signals are generated based on the calculated distances. The indicator compares each distance with the maximum distance encountered so far.
If a new maximum distance is found, it updates the value and considers the corresponding direction as a potential trade signal. The trade signals are stored in an array for further analysis.
Furthermore, the indicator considers the price action and a calculated regression line to differentiate between long and short trade signals.
Long trade signals are identified when the closing price is above the regression line, indicating a potentially bullish setup.
Short trade signals are identified when the closing price is below the regression line, indicating a potentially bearish setup.
The RSI-MFI Machine Learning Indicator visualizes the regression line on the price chart and labels the bars accordingly. It highlights the regression line with different colors based on the trade signals, making it easier for traders to identify potential entry or exit points.
Traders can use the RSI-MFI Machine Learning Indicator as a tool to analyze price movements, evaluate market conditions based on RSI and MFI, leverage machine learning concepts to find similar patterns, and make informed trading decisions.
