Commodity Channel Index
Commodity Channel Index Oscillator – Thread
Commonly known as CCI.
An introduction to how our prices are cyclical like sound that varies in amplitude.
Before we move ahead! (Hit like & spread the learning)
#stockmarket #trading
Our Prices are Cyclical like sound that varies in amplitude.
When it comes to Cyclical behavior the downtrend could best be exhibited by (-) negative values and the uptrend value by (+) positive values.
CCI is presented in the form of a Histogram.
CCI is a Histogram with Zero as the Centre Line +∞on the north and -∞ on the south.
It is therefore called an “Unbound Oscillator” as theoretically has infinity as extremes.
It may very easily reach above 200 levels and in a crash even below -700 to -1000.
As a result, the overbought levels or oversold levels are never spoken about in the Nimblr process.
Trading Rules:
Buy:
When CCI >100 Sell when CCI <-100
No-Trading Zone: 100 to -100
Exits:
Buy when < 100 Sell when >-100
It is unique in purely measuring that which is volatile and hence a better volatility index.
Our Prices are Cyclical and CCI is best to observe cyclical trends.
Formula
What is a Typical Price?
The typical Price is (High + Low + Close) / 3 is itself the Average range of the day.
This marginalizes hyperactivity in prices too so that the final CCI Value does not produce a hyper value that may prove to be a false signal.
The Simple Moving Average is as per the period we wish to calculate say 8 or 34 in our case.
CCI uses a moving average rather than an exponentially moving average as per the design of Donald R. Lambert ( the originator).
What’s the primary Role of CCI?
– Provide numerical Base to Price Flow Entry and Exits.
Like we have Price Breakouts in Candlesticks the same equivalent in CCI is when CCI moves above 100 for a bullish upside and below -100 for a bearish downside move.
Thank you for reading!
We have a “Masterclass on CCI” webinar which would help you deep dive into the subject.
Focusing on plenty of case studies showing entry & exit possibilities.
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