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Rank Correlation Index (RCI)

What the Rank Correlation Index measures, how to read its +80 and −80 levels, its settings on MillionChart and a worked example on gold.

The Rank Correlation Index (RCI) asks one question of the last bars: how steadily has price gone up or down? It ranks the closes of the window by time and by price and measures how well the two orders agree: +100 when every bar closed higher than the one before, −100 when every bar closed lower, near 0 when the closes were mixed. It is drawn in its own pane on a fixed −100 to +100 scale with levels at +80 and −80. The RCI is a staple of Japanese charting; the statistic underneath is Spearman's rank correlation.

RCI (10, Close) under gold, daily candles
RCI (10, Close) under gold, daily candles

What it shows#

  • RCI — one line in its own pane. Near +100 the closes of the window rose almost bar by bar, near −100 they fell almost bar by bar, around zero there was no steady direction. It measures the regularity of a move, not its size: ten small up-closes in a row score the same +100 as ten large ones.
  • Upper and Lower — dashed levels at +80 and −80.
  • Zero — a dotted line at 0.

How it is calculated#

For the last Length bars (10) each close gets a time rank (the newest bar is 1) and a price rank (the highest close is 1; equal closes share the average of their ranks). The RCI is Spearman's rank correlation of the two rankings in percent, 100 × (1 − 6 Σd² / (n (n² − 1))), where d is the difference between a bar's two ranks and n the length. The Source can be another price than the close. The first value appears on the tenth bar.

How traders use it#

  • Above +80 is a steady rise over the window — an overbought zone in the Japanese reading — and the line turning down from there is a sell setup; below −80 and turning up is the mirror buy setup.
  • A rise through zero says the window has tipped from falling to rising on balance.
  • A common layout stacks three RCIs with different lengths (for example 9, 26 and 52): the short one times the entry, the long one gives the direction. Add the indicator three times and change the Length of each.
  • Watch out for: with a short length the line swings from one extreme to the other within a few bars, and in a sideways market it crosses the levels constantly.

Settings#

SettingDefaultWhat it changes
Length10Bars in the window that is ranked (2 to 500); longer is smoother and slower to reach the extremes
SourceCloseThe price that is ranked: Close, Open, High, Low, Mid, Typical or Average
Colours and style—The colour of the RCI line and of the Upper level, Zero line and Lower level

Example on gold#

Suppose gold has risen on eight of the last ten daily candles, from $4,220 to $4,300, and the RCI reads +90. For example, a trader who bought early in the move could use the line turning down and crossing back below +80 as a cue to take part of the profit, since the steady run is breaking. If the RCI holds above +80 while price keeps closing higher, the cue has not come. A fall through zero would say the last ten closes are now mixed to lower.

Add it to your chart#

  1. Click Indicators in the top strip (on the Pro screen you can press I).
  2. Type rci and click the indicator.
  3. Click its chip in the legend to open the Inspector and change the settings; drag the chip to reorder; the dot hides it; × removes it.