CCI indicator -Commodity Channel Index (Commodity Channel Index). CCI indicator has been developed in the eighties by Donald Lambert. In operation indicator incorporated assertion that the price in the market is cyclical and high prices are replaced by low-cycle in a specific order. By defining this procedure can predict the beginning and end of a trend.
CCI indicator is an oscillator, drawn near zero and has no restrictions on the vertical scale. For the indicator by default added two more levels of -100 / +100. These levels can be selected individually for themselves, it is possible -80 / +80, -70 / +70 and so on, but it is worth noting that this parameter affects the accuracy of signals.
CCI indicator Formula
First calculated Typical Price (typical price):
TP = (HIGH + LOW + CLOSE) / 3
Further, SMATP = SMA (TP, N)
where:
T - period of the indicator CCI (number of days for which the indicator takes the data to calculate) Here Donald recommended to select 20 or 60 days.
It then calculates the average deviation as the difference Mean Deviation TP and SMATP.
After which the indicator is calculated CCI:
CCI = (TP - SMATP) / (0.015 x Mean Deviation)
Trading with CCI indicator are as follows:
1. Definition of divergence, ie divergence indicator and the price. These signals are very rare, but have a place to be.
2. Using the CCI indicator as an indicator of overbought / oversold. Typically, the value of this indicator are in the range of -100 to +100 (the default), output prices for the specified limits means oversold or overbought market.
The strongest signals are obtained from the intersection of CCI indicator levels of -100 / +100, less strong when the CCI indicator crosses the level "0" signals from the intersection of "0" imply lower profits. The figure below marked with the possible entry points.
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