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HomeFinance and AccountingMarket TradingCCI indicator vs RSI: Everything you need to know about

CCI indicator vs RSI: Everything you need to know about

CCI indicator vs RSI: Everything you need to know about
Photo by Nicholas Cappello on Unsplash

Are you looking for the best oscillator that will work fine for you? Well, first you will have to learn as much as possible about different indicators. In this CCI indicator vs RSI indicator overview, you will find out everything about both oscillators as well as how they work.

What Is RSI?

It is the momentum oscillator that determines the speed for price movements as well as their change, and it varies between 0 and 100. It is often used to define a general trend, and it can be considered a leading indicator.

It is capable of forming patterns for chats like trend lines or bottoms. Usually, overbought stands above 70 and oversold below 30.

RSI is a popular technical analysis tool that can also be used as a versatile tool and complete such tasks as the generation of the potential buyers, display of overbought and oversold conditions, price movement confirmation, as well as many other things.

RSI can give buy and sell signals in different ways: for example, a trader can buy when price and RSI are increasing or falling.

Here is the formula for RSI:

RSI = 100 – [100 / ( 1 + (Average of Upward Price Change / Average of Downward Price Change ) ) ].

CCI: Understanding How It Works

CCI is commonly used to track market movements that show buying and selling. The goal of CCI is to compare the current price to the average price during the specified period of time. The standard window is usually 20 periods.

All kinds of strategies can use CCI in multiple ways, including CCI basic strategy, multiple timeframe CCI strategy, as well as many others.

Of course, as well as any other oscillator, it has some disadvantages as well. It might end up producing a lot of false signals, especially if the conditions are intermittent. It can result in an unclear short-term direction which might also lead to an error.

This is the formula for CCI:

CCI = (((Highest price+ Lowest price) +  Closing price )/3) – n period moving average of M) / ( 0.015 * Deviation).

What Is a Difference between RSI and CCI?

Both oscillators are one of the most popular choices these days. First of all, it is important to note that RSI measures the speed of price changes, while CCI’s primary goal is to track regular deviations.

You can use both for different trading strategies as well as for creating new strategies separately, or you can combine them and create a trading strategy that would show incredible results.

If you are not sure which one can be better to define oversold and overbought conditions, then you will have to consider both your preferences as well as the trading style.

These oscillators show the same data, but their setting might differ a bit. This is why you will have to decide on what works better for you by trying both strategies.

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