What is the CCI – Commodity Channel Index
CCI – Commodity Channel Index simplified
Is an oscillator which developed buy Donald Lambert in 1980.
Today the CCI is well known as an oscillator which assists traders determine different assets trend,
However the original use of this oscillator was to analyze commodities.
A combined formula of price moving average and deviation can provide traders with solid trend,
overbought and oversold scenarios,
Moreover, the oscillator can provide traders with a major trend change.
Using the CCI is pretty simple since it is a stand alone oscillator and the signals are pretty clear.
Here is an example:
As you can see in the chart There are two lines –
This two lines are showing the oversold and overbought areas.
The CCI oscillator oversold and overbought areas can be adjusted manually and each trader can decide what is working for him based on the oscillator signals and behavior and based on the trader strategy and skills.
CCI – My Way
The CCI is one of the most reliable tools I have in my arsenal.
Take a look again on the chart,
You can clearly see the deviation and how simple was it the recognize the change of the trend.
There is a low in the asset price which is followed by a lower low,
When watching the CCI the picture is totally different (!)
There is a low in the oscillator which followed by a HIGHER low.
The CCI most of the times comes with the same default parameters,
The time period is normally 14 the upper line is 100 underline is -100,
Some traders add two more lines which are the 200 and the -200 lines for very “extreme” scenarios recognition.
As I already said,
I am using the CCI oscillator as a stand alone oscillator which can provide me accurate signals by itself.
The two main things which you must add to this equation are obviously candlesticks pattern recognition and proper risk management.
This is the only way that steadily works for me for the long term.
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