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Technical Indicators

Thu, Jun 5th, 2025
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The descriptions, formulas, and parameters shown below apply to both Interactive Charts and Snapshot Charts, unless noted. Please note that some of the parameters may be slightly different between the two versions of charts.
Studies noted with * are available only in Snapshot Charts and those noted with ^ are available only in Interactive Charts.
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Constance Brown Composite Index

Indicator Type: Standalone - Interactive Charts Only

The Constance Brown Composite Index is an unbound momentum indicator introduced by Constance Brown in her book Technical Analysis for the Trading Professional. This new and improved version of RSI attempts to remedy some of the shortcomings of the traditional RSI indicator developed by Welles Wilder. First, Brown added a momentum component to her indicator, which is lacking in Wilder's version. In addition, Brown opted to make the Constance Brown Composite Index an unbound indicator. Traditional RSI, due to its bounded nature, can miss some reversal signals. Brown recommends looking for divergences between the Constance Brown Composite Index and traditional RSI, which can indicate an upcoming reversal.

The Constance Brown Composite Index is typically plotted along with fast and slow moving averages of the indicator line. MA crossovers with the indicator line or each other can signal buying and selling opportunities.

Constance Brown Composite Index

Calculation

RSI Chg = 9-period ROC of 14-period RSI
RSI Mom = 3-period SMA of 3-period RSI
Composite Index Line = RSI Chg + RSI Mom
Fast SMA Line = 13-period SMA of Composite Index Line
Slow SMA Line = 33-period SMA of Composite Index Line

First, the 9-period rate of change is calculated for the 14-period RSI. Using the rate of change rather than the RSI itself allows the value to range outside the typical RSI boundaries.

Second, the 3-period simple moving average of the 3-period RSI is calculated. This adds a momentum component to the indicator value.

Finally, the values from the first two steps are added together to create the Composite Index.

There is no normalization built into this formula, as there is in Wilder's traditional RSI. This means that the values can range outside of the 0 to 100 limits of traditional RSI. CMB Composite Index values can even be negative.

As mentioned earlier, the Constance Brown Composite Index is plotted along with a faster and a slower SMA of the index. Brown recommends 13 periods for the faster and 33 periods for the slower, but these values can be adjusted to make them faster or slower, in order to meet your trading needs.

The parameters of the Constance Brown Composite Index itself cannot be adjusted by the user.

Interpretation

Use the Constance Brown Composite Index to look for divergences that may signal an upcoming trend change; or MA crossovers that serve as buy and sell signals.

Divergences

As with RSI, divergences can be used to spot price moves that are no longer confirmed by momentum. Typically the Constance Brown Composite Index is compared with traditional RSI to spot divergences. In this situation, the RSI functions as the “price” part of the divergence, and the Constance Brown Composite Index is the momentum indicator.

While the Constance Brown Composite Index is typically compared with traditional RSI, it can be useful to look for divergences with price as well.

Of course, divergences on their own are not enough to trigger a buy or sell signal; chartists will want to use this technique in conjunction with other confirming indicators.

MA Crossovers

The Constance Brown Composite Index is plotted along with a fast and a slow moving average of the index line. Crossovers between the index line and its two MAs can function as buy and sell signals.

The Constance Brown Composite Index line crossing above both its MAs is a clear buy signal; similarly, the index line crossing below both MAs is a sell signal. Just like with price-based MAs, a faster MA crossing above or below the slower MA can also be used as a buy or sell signal.

By default, the faster MA is set to 13 periods and the slower MA is set to 33 periods. These settings can be adjusted to make the MAs more or less responsive as fits your timeframe and trading style.

Conclusion

Constance Brown's Composite Index adds a momentum component and removes the boundaries from traditional RSI in order to catch reversals that might be missed with the traditional RSI indicator.

Divergences between RSI and the Constance Brown Composite Index (or between price and the index) can be used to spot possible trend reversals. Crossovers between the Constance Brown Composite Index and its moving averages can serve as buy and sell signals.

As with all indicators, traders should use the Constance Brown Composite Index in conjunction with other indicators and analysis techniques.

Default Parameters:

  • Period1Rsi (14) - The number of periods to use for the first RSI
  • Period1Mom (9) - The number of periods to use for the momentum calculation in the first RSI
  • Period2Rsi (3) - The number of periods to use for the calculation of the second RSI
  • Period2Ma (3) - The number of periods to use for the momentum calculation in the second RSI
  • PeriodFastMa (13) - The number of periods to use in the calculation of the fast Composite Index Line
  • PeriodSlowMa (33) - The number of periods to use in the calculation of the slowComposite Index Line.

(Source: StockCharts.com)

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