How is ConnorsRSI Different than Traditional Indicators?
ConnorsRSI provides valuable information in that it quantifies:
- how overbought or oversold prices are;
- the duration of the recent trend; and
- the magnitude of the most recent price change.
Combining these factors into a single indicator helps identify the best trading opportunities since ConnorsRSI is designed to be more responsive to the current market action.
In contrast, traditional momentum indicators, like the Relative Strength Index (RSI) quantify only the degree that prices are overbought or oversold and usually do so with a significant amount of lag as a result of the way it is calculated. RSI was first described in 1978 and many traders still rely on the exact same rules that were based on data from the 1970s.
Markets have changed a great deal in the past 35 years but traders using the typical default settings for RSI have not kept up with those changes. It is obvious that traders need new tools and new ideas to succeed.