Connors RSI Indicator
The Connors RSI is a more advanced RSI that uses a relatively shorter period to react to price changes. The ideal identifier for the overbought and oversold zone.
Description
The Connors RSI is an extended version of the regular RSI developed by Larry Connors. It uses period 2, thanks to which it reacts faster to price changes. The overbought area is set at 90, while the price enters the oversold area if it falls below 10.
This is very different from other RSIs that use a 14 period and set the oversold area below 330 and the oversold area above 70.
You can use the indicator on any time frame to trade any currency pair. The customization option allows you to add and customize overbought and oversold areas.
How to use the Connors RSI to identify the perfect buy and sell signals
The indicator works like a regular RSI.
Buy signal
When the indicators fall below 30, the currency pair is oversold. Therefore, a rally is quite likely. You should open long positions.
Sell signals
A reading of 90 indicates that the currency pair is overbought and buying pressure is likely to ease, leading to a pullback. Therefore, you should open short positions.
Connors Rsi trading example
The chart shows a 4-hour chart of the euro against the pound sterling. The price reverses sharply after entering the overbought zone. This means that buyers have left the market, perhaps after reaching their goals. The price has dropped a lot.
After some time, the price entered the oversold zone. The bears left the market, causing a small rally.
Conclusion
Connors RSI is a modified RSI indicator that helps identify overbought and oversold areas. It uses a shorter period to detect precise changes. The indicator works well in combination with other indicators.