NinjaTrader RCI (Rank Correlation Index) Indicator

The Rank Correlation Index (RCI) uses a combination of price change data and time change data to identify potential changes in market sentiment, thereby exposing turning points.

Key Points About RCI

• Based on Ranking:
  Instead of using raw price values, the RCI assigns ranks to prices and to time periods. This means it’s more focused on the order of data rather than the magnitude of change.
• Calculation Method:
  It uses a formula similar to Spearman’s rank correlation coefficient where d is the difference between the time rank and the price rank, and n is the number of periods. The result is scaled between -100 and +100.
• Interpreting the Value:
  • +100: A perfect positive correlation – the most recent prices are the highest (strong uptrend).
  • -100: A perfect negative correlation – the most recent prices are the lowest (strong downtrend).
  • Near 0: Little to no trend, suggesting that the prices do not have a clear sequential order.
• Usage in Trading:
  Traders use RCI to identify the strength and direction of trends. Because it’s based on ranking rather than absolute values, it can sometimes filter out noise and outlier effects, providing a clearer view of the underlying trend dynamics.