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Rank Correlation Index Spearman (RCI) - Tradesignal Online

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Rank Correlation Index Spearman (RCI)

Description The Rank Correlation Index Spearman (RCI), which here has probably been presented for the first time as part of a +1 software package, was adopted from the field of statistics. In contrast to many other indicators, a completely different approach is taken as the basis for calculation. Not the price, but the date is used as the variable in the calculation, i.e. the prices are considered in connection with their appearance during the period under observation, thus compiling a correlation between these two variables.

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Calculation A table is created in which the date (column 1) and the close (column 2) is entered. Ranking: The most current date is set to 1 (column 3). Yesterday's date is ranked as 2, and that of the day before yesterday as 3 etc. The highest price is ranked as 1 (column 4) and the subsequent ones always ranked as one greater in relation to their value (decreasing), so that the smallest price in the period under consideration is given the greatest value (n). If the same value (close) appears twice, the place is shared, e.g. if the highest value occurs twice it is ranked twice 1.5 and the next values continue then with 3, 4, 5 and so on. Now the difference d between column 3 and column 4 is formed and then the square of this difference is calculated (column 5). The results of column 5 are summed and multiplied by 6. After the numerator has been computed, the denominator is obtained as follows: period length to the power of 3 minus the period length. The quotient is subtracted from 1 and the difference is multiplied by 100. Formula

Parameters The adjustable period length for the RCI can be chosen from 1 to 500. Since the indicator has only been available recently, no experience has been gained yet as to the best period length. For short-term traders, the period lengths should be chosen to be appropriately short, the opposite applying to long-term investors.

Interpretation The indicator oscillates between +100 and -100. At +100 there is a maximum positive correlation between rising price and date. However, if the indicator shows -100, the price falls continuously while the date continues to rise (falling dates are not possible). There is hence a maximum negative correlation. The interpretation is analogous to that for other oscillators. If the RCI rises above the zero line, this is considered a buy signal, with downside crossings indicating a sell signal.

This article and displayed results, created w ith the available presentation and analysis tools, are used solely for information and do not provide investment advice or recommendation of any kind. All rights reserved. Reproduction, edits and other unauthorized use are under civil and criminal law .

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