RCI3lines

The RCI3lines indicator tracks the Rank Correlation Index across three distinct timeframes to help traders identify trend exhaustion, momentum shifts, and cyclical price movements.

Usage

The Usage of the RCI3lines tool focuses on the interaction between three correlation lines—short, middle, and long-term—to determine market sentiment. Traders typically look for specific clusters or crossovers to gauge entry and exit points.

• Trend Strength: When all three lines (short, middle, and long) move together in the same direction and cluster near the extreme levels (above 80 or below -80), it indicates a strong trending market.
• Overbought/Oversold Reversals: The High and Low lines (defaulted to 80 and -80) serve as threshold markers. A crossunder of the short-term RCI below the High line may signal a bearish reversal, while a crossover above the Low line may signal a bullish recovery.
• Timeframe Convergence: The long-term RCI provides the primary trend direction, while the short-term RCI is used for precise timing. Disparities between the short and long-term lines can highlight potential trend corrections or divergences.

Details

The Rank Correlation Index (RCI) is a technical oscillator based on the Spearman's rank correlation coefficient. Unlike standard momentum oscillators that use price values, the RCI calculates the correlation between the rank of the price and the rank of the time period over a specific interval.

The script calculates three separate RCI values based on user-defined intervals (traditionally 9, 36, and 52). If price and time are perfectly correlated (price rises every day), the RCI will be +100%. If they are perfectly negatively correlated, the RCI will be -100%. This version includes built-in alert conditions for the short-term RCI crossing the key threshold levels to facilitate automated monitoring. This implementation is based on original concepts by Jadbrother and subsequent modifications by gero.

Settings

• Short interval: Sets the period for the fast-reacting RCI line (default is 9).
• Middle interval: Sets the period for the medium-term RCI line (default is 36).
• Long interval: Sets the period for the slow-reacting RCI line (default is 52).
• Source: Determines the price data used for the RCI calculation (default is Close).
• High line[%]: Defines the upper threshold for overbought conditions, typically set at 80.
• Low line[%]: Defines the lower threshold for oversold conditions, typically set at -80.

FAQ

What is the difference between RCI and RSI? While both are oscillators, the Relative Strength Index (RSI) measures the magnitude of recent price changes to evaluate overbought/oversold conditions, whereas the Rank Correlation Index (RCI) measures the correlation between price ranks and time ranks to identify cyclical patterns.

Can I change the sensitivity of the alerts? Yes, by adjusting the "short interval" setting, you can make the leading RCI line more or less sensitive to price fluctuations, which will directly impact when the overbought and oversold alerts are triggered.

How can I access RCI3lines? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.