【RCI×CCI×Volatility #02】The moment of "momentum reversal" seen with CCI
※This article is the second installment in the series “RCI×CCI× Volatility to Capture the Initial Reversal”.
In the first installment, we introduced the overall structure. This time, we focus on the core: the CCI (Momentum).
? Why is it necessary to look at “momentum”
When using RCI to catch trend reversals, many people feel a sense of lag.
There are many moments where profits are missed during the few bars between the reversal and the RCI reaction.
This is where theCCI (Commodity Channel Index) comes in.
CCI is an indicator that quantifies price “momentum” and “overbought/oversold,”
and it can respond more sensitively to short-term changesthan RCI.
In other words, before you are certain that RCI has “turned,”
CCI will tell you that “the momentum is starting to change.”
⚡The essence of CCI: quantifying price’s “heat”
CCI is the index of the difference from the moving average price.
In other words, it shows how far price is from the average.
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CCI above +100 → Overbought zone
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CCI below −100 → Oversold zone
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CCI reverses near 0 → Momentum reversal signal
The reversal near 0 is the most important.
It is the early stage of a trend,the moment when the power flow from selling to buying reverses.
? The combination of RCI×CCI generates “foresight”
When RCI is flat near the lower bound (around −90),
if CCI starts to rise first, it is considered a sign of reversal.
For example:
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RCI (short-term) is still headed downward
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But CCI begins to rise from −100 and goes above −50
This state indicates a price bottom and the emergence of buying power.
Rather than waiting for the RCI to turn upward,you can “front-run the momentum change”.
? Guidelines for settings and how to use
Setting for CCI is generally composed of short-term values (14–20).
However, when combined with RCI, if you set it to be slightly shorter than RCI,
it functions as a leading indicator that offsets RCI’s lag.
Example:
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RCI short-term: 20
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CCI: 14
By maintaining this relationship, CCI always captures momentum a half-step ahead,
and RCI then signals the reversal later in the sequence.
? Weaknesses and cautions of CCI
CCI is sensitive to momentum, butit also reacts to noise.
In particular, during periods of low volatility,
false breakouts of up or down can increase, which requires caution.
Therefore next time, we will explainhow to supplement CCI’s accuracy with volatility.
When RCI×CCI×Volatility, a triad is complete,
the ability to discern the initial reversal becomes much more precise.
? Series links
? Series list
#01：Three-in-one logic that does not miss the instant of reversal
#02：The moment of “momentum reversal” seen by CCI (this article)
#03：The amplification of “heat” of the turn shown by volatility
? In conclusion
This series aims to assist discretionary judgment with a numerical approach by focusing on “how to capture the moment of reversal.”
Please look forward to the next installment as well.
?【The Turn’s Heat Indicated by Volatility】 (Part 3)
? Reference indicator introduction
Some of the logic explained here can be verified in the indicator I have released
“【Golden Turn Point Gold_RCI_Signal】.”
If you would like to see how the combination of RCI and CCI reacts on actual charts,
please click below.
?【Golden Turn Point】Gold RCI Signal ─ The moment of capturing a reversal long on a 5-minute chart