Live chat
Technical Indicators
-
Bill Williams Indicators
-
Oscillators
-
Trends
-
Volume
Commodity Channel Index (CCI)
Purpose
The Commodity Channel Index is an indicator by Donald Lambert. Despite the original purpose to identify new trends, it’s nowadays widely used to measure the current price levels in relation to the average one.
Usage
The indicator oscillates around the naught line tending to stay within the range from -100 to +100. The naught line represents the level of an average balanced price. The higher the indicator surges above the naught line the more overvalued the security is. The further the indicator plunges into the negative area the more potential for growth the price may have.
Still the unbalanced price alone may not serve as a clear indicator neither to the direction the price is following nor to its strength. There are critical values and the crossing directions which need to be looked at closely:
- Exceeding past the 100 level suggests a possible further upward movement
- Decreasing past the 100 level indicates a U-turn and serves as a signal to sell.
- Decreasing past the -100 level suggests a possible further downward movement
- Exceeding past the -100 level indicates a U-turn and serves as a signal to buy.
- Crossing the naught line upwards from below serves as a confirmation to buy
- Crossing the naught line downwards from above serves a confirmation to sell.
Smaller indicator period increases its sensitivity. Shifting critical levels to 200 allows to exclude insignificant price fluctuations.
