QQE: a smoothed RSI with a volatility-based trailing band

What it measures

QQE smooths RSI and then builds a trailing band around it using a measure of how much the smoothed RSI itself typically moves. The signal is the RSI crossing its own trailing level, not a fixed threshold.

That construction addresses the main practical problem with RSI: fixed levels at seventy and thirty mean different things in different volatility regimes, and a trailing band adapts.

It behaves like a SuperTrend applied to momentum rather than to price.

How it is calculated

These are the steps Basis performs, verified against the published definition.

1. 1

   Compute RSI, then smooth it with an exponential average.

2. 2

   Measure the absolute bar-to-bar change of the smoothed RSI and smooth that too — an ATR of the oscillator.

3. 3

   Multiply by the factor to set the band width.

4. 4

   Trail the band toward the smoothed RSI, resetting when it is crossed, exactly as a trailing stop does.

Settings

An RSI period of fourteen with smoothing of five and a factor around 4.238 is the common setting. Raising the factor widens the band and reduces signals; the RSI period changes what is being measured rather than how it is trailed, and the smoothing period sits between the two — it decides how much of the RSI’s own noise reaches the band at all.

How to read it

• The crossing of the smoothed RSI through its trailing level is the signal, and it is far less frequent than an RSI level crossing.
• The distance between the two lines is a measure of how one-sided momentum currently is.
• Because it trails, it holds through pullbacks that would take an RSI reading back through seventy — which is the point.
• A reset of the trailing level after a long run is the strongest signal it produces, because the band had to be crossed rather than merely approached.

Where it misleads

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