Extreme Reversal Indicator: RSI 2 at the 5 and 95 Extremes

Written by Dominic Walsh · Published 5 Jun 2026 · Last updated 9 Sep 2026

Most oscillator tools use a 14-period RSI and 30 or 70 levels. The extreme reversal indicator goes much further out. It runs a 2-period RSI and waits for readings below 5 or above 95, thresholds in the Connors style that a normal RSI almost never reaches. The candle then has to agree before an arrow appears.

This build ships as a compiled .ex4 for MT4 and .ex5 for MT5; the screenshots below come from EURUSD H1.

Platforms	MT4 (.ex4) + MT5 (.ex5)
Chart window	Main price chart
Plots	2: Buy Reversal, Sell Reversal
Alerts	popup
Inputs	6

What the Extreme Reversal Indicator draws on the chart

Buy Reversal places a lime arrow beneath a bar where RSI sat in the extreme oversold zone.

Sell Reversal places a red arrow above the bar at the overbought extreme.

Both arrows sit half an ATR away from the candle, so the gap widens automatically when the market speeds up.

No lines or zones are drawn. The RSI itself stays in its own indicator if you want to watch it.

• Buy Reversal: arrow, lime, width 2, arrow code 233
• Sell Reversal: arrow, red, width 2, arrow code 234

How the Extreme Reversal Indicator calculates its values

A very short RSI

The code calls iRSI with `InpRsiPeriod` bars on the close, and that period defaults to `2`. A 2-period RSI swings across its whole range within a couple of candles. It is not a trend measure at all. It answers a narrower question: how one-sided has the last two bars of movement been.

Extremes that a 14-period RSI never sees

`InpOversoldLevel` at `5.0` and `InpOverboughtLevel` at `95.0` look absurd against the usual 30 and 70. With a 2-period RSI they are reachable but uncommon, which is the point. Larry Connors built his mean reversion work on exactly this pairing of a short lookback with far thresholds.

Candle agreement and volatility spacing

bullish holds when close[i] sits above open[i], with bearish the reverse. That test stops an arrow appearing on a bar still falling hard into the extreme. For placement, atr comes from iATR over `InpAtrPeriod` bars and offset is `InpArrowOffsetATR` times that. Because the spacing scales with volatility, arrows stay legible on a quiet session and on a fast one.

How to read the signals

An arrow marks an extreme reading that the candle itself confirmed, not merely a low RSI print.

Signals should be rare. Frequent arrows suggest the thresholds have been loosened too far.

This is a mean reversion tool by construction, so it will fire against strong trends.

Arrow distance from the candle is a rough volatility gauge, since the offset is drawn from ATR.

Alert channels in this build: popup, one message per closed bar.

Notification is limited to a terminal popup, governed by `InpEnableAlerts` at its `true` default. Because the candle direction test reads the completed close, the message follows the bar closing rather than the moment RSI touches its threshold.

Every Extreme Reversal Indicator input

Core settings

Setting	What it does	Default
InpRsiPeriod	RSI period (Connors style). RSI lookback, default `2`. Anything above about 5 makes the extreme thresholds effectively unreachable.	2
InpOversoldLevel	Extreme oversold threshold. Buy threshold, default `5.0`. Raise it toward 10 for more signals of lower quality.	5.0
InpOverboughtLevel	Extreme overbought threshold. Sell threshold, default `95.0`, the mirror of the buy side.	95.0
InpAtrPeriod	ATR period for offset. Bars in the ATR used for arrow spacing, default `14`.	14

Display settings

Setting	What it does	Default
InpArrowOffsetATR	Arrow offset (x ATR). Arrow distance as a multiple of ATR, default `0.5`.	0.5

Alert settings

Setting	What it does	Default
InpEnableAlerts	Enable alerts.	on

Settings that fit your chart

Short-RSI mean reversion works best where price oscillates around a value rather than trending relentlessly. The majors on H1 and H4 fit, and EURUSD H1 is the reference chart. On the daily chart the signals become rare enough to be worth waiting for. On instruments that trend hard for weeks, a 2-period RSI hits 5 repeatedly all the way down, which is the classic failure of this approach.

When the Extreme Reversal Indicator fails

Trends punish it. An oversold reading in a falling market is a description of the trend, not a reason to expect a turn.

The candle filter checks direction only, not size, so a tiny green candle after a heavy fall passes the test as easily as a strong one.

A 2-period RSI reacts to two bars. Sudden spread widening or a single bad tick can produce an extreme reading with nothing behind it.

Copy the compiled Extreme Reversal Indicator file into your MQL4/Indicators folder, and the MT5 build into MQL5/Indicators, then restart the terminal and drag it onto a chart. The step-by-step guide with screenshots is at how to install MT4 and MT5 indicators.

Download the Extreme Reversal Indicator for MT4 and MT5

The zip holds the compiled Extreme Reversal Indicator build for MT4 and MT5, plus a short README. Compiled files only, no source. Enter your email below and the download link arrives in your inbox.

FAQ

Why does InpRsiPeriod default to 2 instead of 14?

A 14-period RSI is a smoothed trend gauge that rarely leaves the 30 to 70 band. A 2-period RSI is a short-term stretch gauge that covers its whole range in a couple of bars. That is what makes thresholds of 5 and 95 usable. Connors popularised this pairing for mean reversion work, and it only functions with a very short lookback.

What happens if I raise InpOversoldLevel to 30?

You get many more arrows and most of them mean less. With a 2-period RSI, readings under 30 are ordinary rather than extreme. The default `5.0` exists to keep the signal rare. If arrows are too infrequent for you, moving to 10 is a reasonable step; jumping to 30 changes the tool into something else.

Why do the Buy Reversal arrows sit at different distances from the candles?

Because the offset scales with volatility. It comes from iATR over `InpAtrPeriod` bars multiplied by `InpArrowOffsetATR`, which defaults to `0.5`. When ranges widen, arrows move further out to stay clear of the wick. A fixed point offset would crowd the candle on a fast day and float uselessly on a quiet one.

Does the extreme reversal indicator work in a trend?

Poorly, and that is inherent to the method. In a sustained downtrend a 2-period RSI drops below 5 repeatedly, and each reading marks continuation rather than a turn. The candle direction filter removes some of the worst cases. Most traders pair a tool like this with a separate trend filter of their own.

Are results guaranteed?

No. Trading involves risk. Results are not guaranteed; past performance is not indicative of future results. Use the Extreme Reversal Indicator as one input. Always backtest before trading live.