High[j]-High[j-2] +
The range expansion index (REI) is a technical indicator used in the technical analysis of financial markets. It is intended to chart the relative strength or weakness of a trading vehicle based on the comparison of the recent price changes and the overall price changes for the period.
The REI can be classified as a momentum oscillator, measuring the velocity and magnitude of directional price movements. The REI shows overbought/oversold price conditions by measuring the relation between the sum of "strong" price changes (such that form a trend) and all price changes for the period.
The REI is most typically used on an 8 day timeframe. It changes on a scale from − to +, with the overbought and oversold levels marked at +60 and −60, respectively.
The range expansion index was developed by Thomas DeMark and published in his book, The New Science of Technical Analysis.[1]
Two sums are calculated for each day. One is the conditional sum of the "strong" price changes:
where is the period of calculation (usually, 8), is a first condition:
is a second condition:
and is the price change parameter:
The second sum is calculated as following:
Developed and introduced by Thomas DeMark in the book DeMark on Day Trading Options, the Range Expansion Index (REI) is a market-timing oscillator, meant to cope with problems, which exponentially calculated oscillators, such as the Moving Average Convergence Divergence, encountered. The REI is arithmetically calculated.
The oscillator fluctuates between and + Its default setting includes a period of 8. If a trader is willing to be provided with less but more reliable signals, he/she may use a larger period. If a trader is willing to be provided with more but less reliable signals, he/she may use a smaller period. Thomas DeMark recommends using the default setting.
If the indicator value exceeds the +60 level and then falls below it, a signal to sell is generated. If the indicator value moves below the level and then surges above it, a signal to buy is generated.
Thomas DeMark does not recommend trading in extreme overbought or oversold conditions, indicated by six or more bars above or below the two thresholds.
Chart Source: VT Trader
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For each trading day the value of the indicator is calculated:
According to Thomas DeMark, price weakness is shown by the indicator when its value rises above level 60 and then declines below it. Price strength is shown when the REI goes below −60 and then rises above that level.
Range Expansion Index (MetaTrader indicator) — is a relative oscillator indicator that measures the pace of the price changes and signals overbought/oversold states if the price demonstrates weakness or strength. It was developed by Tom DeMark and explained in his book The New Science of Technical Analysis. The value of the indicator changes from to + The REI is an enhanced oscillator because it tries to remain calm during the range trading and indicates signals only when the significant peaks or bottoms are spotted. You can download this indicator both for MT4 and MT5.
Tom DeMark suggested using the default period of 8. When the price goes above level 60 and the declines below it, the bearish signal is given. When the price goes below level and then rises above it, the bullish signal is given. I find this indicator rather inaccurate (like all oscillators), but on the lower timeframes it can be quite useful.
Do you have any suggestions or questions regarding this indicator? You can always discuss Range Expansion Index with the other traders and MetaTrader programmers on the indicators forums.
indicator
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