【RCI×CCI×Volatility #01】The Triune Logic That Does Not Miss the Moment of the Reversal’s Initial Move
This article is the first installment of the series “Capturing the Initial Reversal Move with RCI x CCI x Volatility.”
In the future, we will delve into the three indicators CCI, volatility, and RCI,
and explain methods to more accurately capture the “initial reversal move.”
Whether you can catch the market’s initial move that signals a reversal greatly affects trading success.
Many traders judge trend reversals with RCI, but RCI alone cannot avoid lag or false signals.
Therefore, this time we will introduce a logic that complements RCI’s weaknesses by combining CCI (momentum) and volatility (rate of change).
Chapter 1: Why RCI is strong but prone to losses
RCI is an indicator that shows the strength of the trend based on price rank correlation, but
・signals of reversal tend to be delayed
・in flat markets it is prone to noise
such characteristics exist.
In particular on 1-minute or 5-minute charts, it is common to see the counterproductive effect of “buy after rising” or “sell after falling.”
Chapter 2: An idea to supplement RCI with CCI and volatility
Here comesCCI (Commodity Channel Index) and volatility (ATR or standard deviation)
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CCI quantifies “momentum” and “overextension”
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Volatility represents the “heat” of the market
By multiplying these two with RCI,
the timing when “RCI signals a reversal and momentum begins to change” =“initial reversal move”can be captured with high precision.
Chapter 3: Concrete signal conditions (example)
For example, the following logic. (This is one example; this indicator has some additional adjustments)
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Short-term RCI reverses up from -90
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CCI breaks above -100 and is rising
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Volatility exceeds the recent average
When these three conditions light up simultaneously, there is a high probability of detecting the market’s “oversold → buyback initial move.”
I believe this logic is the core that has helped me survive for several years with a simple approach.
This logic tends to be strong, especially in “rapid turnaround” assets like BTC and GOLD. It also works fairly well for altcoins, which I like.
Summary
The combination of RCI × CCI × volatility is not merely a collection of oscillators,
but a three-stage logic to numerically capture the initial move of a reversal.
It’s a three-stage logic for capturing the initial reversal move.
By multiplying RCI’s sensitivity, CCI’s momentum, and volatility’s heat,
you can establish a strategy to enter “one step early with justification.”
I have released an indicator that implements this concept.
If you’re interested in how to catch the initial reversal move on real charts, please see below.
you can view the indicator there.