Connors RSI: A Three-Part Short-Term Momentum Index

Key Takeaways

• Connors RSI averages three components with default settings of 3, 2, and 100.
• The result is bounded between 0 and 100, the same scale as classic RSI.
• It moves faster and reaches extremes more often than Wilder's RSI on the same chart.
• Larry Connors recommends 90 and 10 as overbought and oversold thresholds, not 70 and 30.

What It Is

Connors RSI is published by Larry Connors of TradingMarkets and is detailed in the StockCharts ChartSchool entry on the indicator. It is closely tied to Connors' famous 2-period RSI strategy and shares the same mean-reversion philosophy.

The indicator does not just use shorter RSI lookbacks. It blends three different measurements of short-term price behavior into one number. That blend is what makes the output more responsive than any single RSI calculation.

The Intuition

Short-term reversals tend to happen when three conditions line up at once: recent prices have moved sharply against the trend, the run has lasted several days in a row, and today's price change is extreme compared to recent history. Connors RSI tries to detect all three at once.

The first component, a 3-period price RSI, captures the fast price extreme. The second component runs RSI on the streak of consecutive up or down closes, capturing the persistence of the move. The third component is a percentile rank of recent rate of change, capturing the extremeness of today's bar relative to the last 100. Averaging the three smooths each component's noise.

How It Works

The default formula is CRSI(3, 2, 100):

1. PriceRSI = RSI(close, 3)
2. Streak = consecutive count of up closes (positive) or down closes (negative)
   StreakRSI = RSI(Streak, 2)
3. ROC = 1-day percent change
   PctRank = percent of last 100 ROC values that are below today's ROC
4. CRSI = (PriceRSI + StreakRSI + PctRank) / 3

PriceRSI uses a Wilder 3-period RSI on closes. StreakRSI runs a 2-period RSI on the up-down streak count, so a stock that has closed up four days in a row carries a streak value of plus 4. PctRank takes the latest 1-day percent change and ranks it against the last 100 daily percent changes, expressed as a percentile from 0 to 100.

The final CRSI value is the simple average of the three. Because each component is already a 0 to 100 reading, the average sits between 0 and 100 as well. Connors recommends entries when CRSI dips below 10 and exits when it climbs back above 70 or above 90, depending on the variant.

Worked Example

Suppose a stock has fallen for five sessions in a row. The 3-period price RSI prints 12. The streak value is minus 5, and running a 2-period RSI on the streak series gives a StreakRSI of 8. Today's percent change is the most negative in the last 100 sessions, so PctRank is 1.

CRSI = (12 + 8 + 1) / 3 = 7.0

CRSI reads 7.0, well below Connors' 10 threshold. A trader running a Connors-style mean-reversion strategy would treat this as a high-conviction oversold setup and consider a long entry on the next session. The exit rule is typically a CRSI cross back above 50 or above 70, depending on the variant.

Common Mistakes

1. Using 70 and 30 as thresholds. Connors RSI runs faster and more extreme than Wilder's RSI. Most published rules use 10 for oversold and 90 for overbought.
2. Applying it to strong trends. The indicator is built for mean reversion. Buying CRSI below 10 in the middle of a bear market produces the wrong signals; Connors strategies usually layer on a long-term trend filter such as price above the 200-day SMA.
3. Trading every signal without a filter. Without a volatility or liquidity filter, CRSI fires in illiquid names where mean reversion does not hold.
4. Ignoring the exit rule. Most Connors strategies have explicit exit conditions, often a close back above the 5-day moving average. Skipping the exit rule changes the entire risk profile.
5. Confusing CRSI with RSI(2). RSI(2) is the simpler 2-period Wilder RSI on price. Connors RSI is a three-component blend. They are different indicators from the same author.

Frequently Asked Questions

What is Connors RSI in simple terms? Connors RSI is a short-term momentum oscillator that averages a 3-period price RSI, a 2-period RSI of the up-down streak, and a percentile rank of the 1-day percent change. The result is a bounded 0 to 100 reading built for mean reversion.

How does Connors RSI affect investment decisions? Short-term swing traders use Connors RSI to time pullback entries inside a confirmed uptrend. A reading below 10 in a stock trading above its 200-day moving average is the classic setup for a long mean-reversion trade.

What is a real-world example of Connors RSI? On large-cap US stocks in extended uptrends, Connors RSI regularly dips below 10 during 3 to 5 day pullbacks. Backtests on these signals form the core of Larry Connors' published short-term strategies.

How can investors use Connors RSI effectively? Apply Connors RSI only in established trends and pair it with a long-term trend filter and a defined exit rule. Treat readings below 10 as setups, not as standalone triggers.

How is Connors RSI different from regular RSI? Regular RSI uses one calculation: gains versus losses over a single lookback on price. Connors RSI averages three components and is much more reactive, so its overbought and oversold thresholds are 90 and 10 rather than 70 and 30.

Sources

1. StockCharts ChartSchool. ConnorsRSI. https://chartschool.stockcharts.com/table-of-contents/technical-indicators-and-overlays/technical-indicators/connorsrsi
2. StockCharts ChartSchool. RSI(2) Strategy. https://chartschool.stockcharts.com/table-of-contents/trading-strategies-and-models/trading-strategies/rsi-2
3. TradingView Help. Connors RSI (CRSI). https://www.tradingview.com/support/solutions/43000502017-connors-rsi-crsi/
4. Forex Training Group. Ultimate Guide to the Connors RSI Indicator. https://forextraininggroup.com/ultimate-guide-to-the-connors-rsi-crsi-indicator/

Disclaimer

This article is educational content only and is not financial advice. Nothing here is a recommendation to buy, sell, or hold any security. Consult a licensed advisor before making investment decisions.